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Monopolies  Past  and  Present 


INTRODUCTORY  STUDY 


JAMES    EDWARD    Le    ROSSIGNOL,    Ph.  D. 

Professor  of  Economics  in  the  University  of  Denver. 
Special  Lecturer  in  Economics  in  McGill  University. 


NEW  YORK 

THOMAS  Y.  CROWELL  &  COMPANY 

PUBLISHERS 


\ 


fCLh 

CoPTRTOnT.      1001, 

By  Thomas  Y.  Crowkll  &  Company. 


■^  PREFACE 


4 


In  the  following  pages  the  writer  has  endeav- 
ored to  provide  an  historical  introduction  to  the 
etudy  of  monopolies  for  the  use  of  busy  men 
who  may  wish  to  find  in  a  single  brief  work  a 
digest  of  a  mass  of  information  only  to  be  ob- 
tained in  a  number  of  special  treatises.  For  the 
convenience  of  those  who  wish  to  pursue  a  fur- 
ther investigation  of  the  subject  presented  a  list 
of  the  chief  secondary  sources  of  information  is 
given  at  the  beginning  of  each  chapter. 

The  problems  connected  with  modem  monopo- 
lies are  stated  as  clearly  and  concisely  as  possible, 
and  it  is  hoped  that  the  reader  will  not  be  satis- 
fied with  the  solutions  proposed  but  will  be  suffi- 
ciently interested  to  work  out  conclusions  of  his 
own. 

The  writer  desires  to  acknowledge  his  indebtr 
edness  to  the  works  of  the  authors  whose  names 
are  mentioned  in  the  text,  but  particularly  to 
the  works  of  Cunningham  and  Ashley,  from 
which  he  has  obtained  much  information  con- 
cerning English  economic  history. 

J.  E.  Le  R. 

Denver,  Colorado, 
March  15,  1901. 


CONTENTS. 


CHAP.  PAGE. 

I.  The  Natuke  of  Monopoly 1 

II.  Monopolies  in  Ancient  and  Medieval  Times.  .  21 

III.  Gilds  AS  Monopolies 39 

IV.  Exclusive  Trading  Companies 65 

V.  Patents  AND  CoPYKiGHTS 87 

VI.     Municipal  Monopolies 117 

VII.    Railways  as  Monopolies 143 

VIII.    Capitalistic  Monopolies 197 

Index  355 

vii 


I. 

THE   NATURE  OF  MONOPOLY. 


R.  T.  Ely,  "Monopolies  and  Trusts,"  New  York,  1900. 

C.   W.   Baker,   "  Monopolies  and  the  People,"   New  York, 

1900. 
C.  J.  Bullock,  "  Introduction  to  Political  Economy,"  Ch. 

XI,  New  York,  1897. 
A.  T.  Hadley,  "  Economics,"  Ch.  VI,  New  York,  1897. 
J.  Shield  Nicholsox,  "  Principles  of  Political  Economy," 

Book  III,  Ch.  VII,  London,  1897. 
Alfred    Marshall,    "  Principles    of    Economics,"    Vol.    I, 

Ch.  XIII,  2nd  Ed.,  London,  1891. 
Henry  Sidgwick,  "  Principles  of  Political  Economy,"  Book 

II,  Ch.  X,  2nd  Ed.,  London.  1887. 

Simon  Newcomb,  "  Principles  of  Political  Economy,"  Book 

III,  Ch.  IV,  New  York,   1886. 

Articles  on  "  Monopoly "  in  the  "  Encyclopcedia  Britan- 
nica,"  "  Lalor's  Cyclopwdia  of  Political  Science  and 
Political  Economy "  and  "  Palgrave's  DictionoA-y  of 
Political  Economy.'^ 


CHAPTEK  I. 

THE  NATURE   OF   MONOPOLY. 

According  to  its  derivation  the  word  monopoly 
means  exclusive  sale.  Exclusive  sale  is  based 
upon  exclusive  possession  or  control  of  the  com- 
modity that  is  for  sale.  If  at  the  siege  of  some 
city  one  man  had  possession  or  control  of  all  the 
food  in  that  city,  no  food  could  be  sold  without 
his  permission.  He  would  have  a  monopoly  of 
food  and  would  be  called  a  monopolist.  This 
would  be  monopoly  in  the  prunitive  meaning  of 
the  word.  But  the  word  may  be  used  in  another 
sense  as  well.  When  the  Hudson's  Bay  Com- 
pany had  exclusive  control  of  the  fur  trade 
throughout  the  vast  region  drained  by  the  rivers 
flowing  into  Hudson's  Bay  and  the  Arctic  Ocean, 
the  savages  who  wished  to  sell  their  furs  without 
journeying  to  the  distant  French  settlement  were 
obliged  to  sell  them  to  the  great  fur  company. 
The  company  was  the  sole  buyer  of  furs  and  the 
sole  seller  of  fire-arms  and  blankets  and  had  there- 
fore a  monopoly  of  the  buying  of  furs  and  a 
monopoly  of  the  sale  of  blankets.  Monopoly  is 
therefore  exclusive  buying  as  well  as  exclusive 
selling.  This  is  absolute  monopoly,  where  com- 
petition is  absolutely  excluded. 


4  MONOPOLIES   PAST   AND    PRESENT. 

Using  the  word  exclusive  in  this  rigid  sense  a 
list  of  the  chief  monopolies  existing  in  the  United 
States  at  the  present  time  would  include  govern- 
ment monopolies,  principally  the  postal  service; 
monopolies  of  the  sale  of  inventions  and  books 
granted  by  patents  and  copyrights;  municipal 
monopolies,  as  water-works,  gas-works  and  tram- 
ways; the  monopoly  of  railway  service  and  of 
telegraphic  service  between  local  points;  monopo- 
lies connected  with  the  use  of  certain  roads, 
bridges,  ferries,  canals  and  irrigation-works.  The 
list  would  include  few  if  any  of  the  so-called 
trusts,  for  few  if  any  of  these  have  an  absolute 
monopoly  of  the  commodities  or  services  in  which 
they  deal.  There  can  be  no  such  thing  as  an 
absolute  monopoly  of  the  sale  of  petroleum  in 
any  given  market  unless  there  is  but  one  seller 
of  petroleum  in  that  market,  unless  all  other  sell- 
ers are  permanently  excluded.  The  Standard  Oil 
Company  is  not  a  monopolist  in  this  sense,  for 
there  still  remain  a  few  competitors  within  the 
United  States  and  it  is  possible  to  import  oil  from 
Russia,  though  at  a  higher  price  than  that  of  the 
home  product.  It  is  therefore  evident  that  the 
word  monopoly  is  not  always  used  in  its  most  lit- 
eral sense.  There  is  a  still  more  extended  mean- 
ing. When  people  speak  of  exclusive  selling  they 
do  not  mean  absolutely  exclusive  selling,  but  sell- 
ing that  is  more  or  less  exclusive.     Sometimes 


THE  NATURE  OF  MONOPOLY.  5 

competing  sellers  are  wholly  excluded.  Some- 
times they  are  only  partially  excluded.  Where 
there  is  free,  unrestricted,  omnipresent  competi- 
tion there  is  no  exclusion,  no  monopoly.  Where 
competition  is  prevented  there  monopoly  begins. 
Where  competition  dies  monopoly  reigns  su- 
preme, unless  business  also  dies.  Monopoly  and 
competition  vary  in  inverse  ratio  to  each  other. 
The  keener  the  competition  the  less  the  monopoly, 
the  feebler  the  competition  the  more  complete  the 
monopoly.  Between  perfectly  free  competition 
and  complete  monopoly  there  are  many  interme- 
diate stages.  It  may  safely  be  said  that  no  mo- 
nopoly is  entirely  free  from  the  influence  of 
competition  and  that  seldom  is  competition  so 
fierce  as  to  leave  no  opportunity  for  monopoly 
and  monopoly  profits.  Monopoly  and  competition 
are  everywhere. 

It  is  true,  then,  that  in  the  industrial  world 
monopoly  and  competition  exist  side  by  side,  al- 
ways at  war  but  never  wholly  destroying  one  an- 
other. They  exist  together,  but  how  can  we  dis- 
tinguish them  from  each  other?  Competition  we 
know,  but  how  can  we  recognize  monopoly?  Both 
are  known  bv  the  effects  which  they  produce. 
When  competition  prevails  among  sellers,  the  price 
which  one  seller  can  obtain  is  determined  by  the 
price  which  another  seller  will  accept.  When 
there  is  competition  among  buyers,  the  price  which 


6      MONOPOLIES    PAST   AND    PHESENT. 

one  buyer  must  give  is  determined  by  the  price 
which  another  buyer  is  willing  to  give.  Buyers 
and  sellers  control  one  another.  They  control  and 
are  controlled.  They  are  causes  and  effects.  The 
result  of  this  interaction  is  what  is  known  as  a 
competitive  price.  This  price  is  the  result  of  the 
mutual  regard  and  consideration  of  one  dealer 
toward  another.  If  now  a  single  dealer  becomes 
more  powerful  than  the  other  dealers,  so  that  in 
his  transactions  he  ceases  to  have  regard  to  the 
actions  of  these  other  dealers,  if  he  still  controls 
them  but  is  not  controlled  by  them,  this  dealer 
has  obtained  a  position  in  the  market  analogous 
to  that  of  a  monopolist.  He  is  a  controlling  power 
in  the  market  and  the  price  of  the  commodities 
in  which  he  deals  is  due  to  his  control  more  than 
to  the  control  of  any  other  dealer.  A  monopolist 
has  no  competitors.  He  controls  the  whole  supply 
or  the  whole  demand.  He  therefore  controls  the 
price.  The  great  dealer  who  has  a  few  minor  com- 
petitors is  able  to  imitate  the  true  monopolist. 
He  controls  a  large  part  of  the  supply  or  a  large 
part  of  the  demand.  He  therefore  also  controls 
the  price  to  a  considerable  extent.  As  far  as  he 
is  able  he  does  the  work  of  a  monopolist  and  he 
is  a  monopolist  to  the  extent  of  his  ability.  The 
difference  between  him  and  a  monopolist  is  a  dif- 
ference of  degree,  not  of  kind.  He  belongs  to 
the  same  family.  He  is  a  blood  relation.  He  is 
a  monopolist. 


THE  NATURE  OF  MONOPOLY.  7 

The  power  obtained  bj  the  monopolist  in  the 
economic  world  may  be  used  in  a  variety  of  ways. 
By  virtue  of  his  position  the  monopolist  may  re- 
fuse to  sell  or  refuse  to  buy.  He  may  be  haughty 
toward  his  would-be  rivals,  arrogant  toward  the 
public,  tyrannical  toward  his  working-people. 
He  may  say  to  many  go  and  come.  He  may  do 
all  these  things  and  more,  yet  the  economic  im- 
portance of  his  existence  and  activities  lies  chiefly 
in  the  fact  that  he  controls  the  supply  or  the 
demand  of  what  he  sells  or  buys  to  such  an  ex- 
tent that  he  also  controls  the  price.  We  may 
then  say  that  the  control  of  price  is  the  essential 
and  characteristic  feature  of  monopoly,  that  wher- 
ever it  is  absent  either  there  is  no  monopoly  or 
the  economic  power  of  monopoly  is  not  fully  ex- 
ercised. A  trust  is  a  monopoly  or  a  monopolist 
if  it  does  or  can  control  the  price  of  what  it  sells 
or  buys.  It  is  not  a  monopolist  if  it  cannot  exer- 
cise this  control.  Let  us  then  define  monopoly 
as  the  control  of  the  supply  or  the  demand  of  an 
economic  good,  hy  one  person  or  a  combination 
of  persons,  to  such  an  extent  that  that  person  or 
combination  of  persons  is  able  to  control  the  price 
of  the  economic  good. 

A  few  illustrations  may  serve  to  explain  the 
nature  of  monopoly  control.  One  of  the  most 
complete  of  all  monopolies  is  that  secured  by  a 
patent.     Under  a  patent  the  law  grants  to  the 


8  MONOPOLIES   PAST   AND    PRESENT. 

patentee  for  a  term  of  years  the  sole  right  of 
manufacturing  and  selling  his  invention.  When 
an  inventor  has  obtained  a  patent  for  his  inven- 
tion he  has  received  the  right  to  establish  a  mo- 
nopoly. If  he  neglects  to  take  advantage  of  that 
right  and  if  no  one  else  wishes  so  to  do,  no  mo- 
nopoly is  established.  If  he  manufactures  his 
invention  and  is  unable  to  sell  it  there  is  monopoly 
in  name  but  no  real  monopoly,  no  exclusive  sale. 
Not  until  the  invention  is  recognized  as  having 
some  economic  value  does  the  monopoly  become 
effective  and  real.  When  the  invention  is  placed 
upon  the  market  its  price  is  regulated  by  the  pat- 
entee and  not  by  any  rival  manufacturers,  for 
none  such  exist.  It  does  not  follow  from  this 
that  the  price  will  be  an  exorbitant  one,  nor  that 
the  patentee  will  earn  enormous  profits.  The 
price  will  not  be  regulated  by  competition  be- 
tween producers,  but  it  will  be  controlled  by  the 
patentee  in  accordance  with  his  estimate  of  pos- 
sible sales.  At  a  high  price  sales  will  be  few. 
At  a  low  price  there  will  be  many  sales.  The 
price  will  be  fixed  by  a  wise  manufacturer  at  the 
most  profitable  point.  The  most  profitable  price 
is  the  price  that  yields  the  greatest  net  profit  or 
the  least  possible  loss.  It  may  be  that  the  article 
patented  must  be  sold  for  a  time  at  an  actual  loss. 
The  price  mil  be  fixed  at  the  right  point  by  the 
manufacturer  who  understands  his  business.     It 


THE  NATURE  OF  MONOPOLY.  ^ 

may  be  that  the  article  will  be  sold  at  a  price  no 
higher  than  the  price  which  would  have  been 
fixed  by  competition.  It  may  be  that  the  price 
will  be  even  lower  than  that.  Perhaps  the  in- 
vention would  not  have  been  put  on  the  market 
at  all  without  the  protection  of  the  patent.  Mo- 
nopoly price  is  not  necessarily  a  high  price.  It 
may  be  high  and  it  may  be  low  according  to  the 
net  profit  that  is  to  be  obtained. 

Suppose  that  our  inventor  has  patented  a  very 
useful  mouse-trap  and  that  he  can  manufacture  it 
in  large  or  small  numbers  at  a  cost  of  two  cents 
apiece.  At  twenty-five  cents  he  may  sell  a  thou- 
sand traps,  giving  him  a  net  profit  of  $230.  At 
thirty  cents  the  sales  may  be  reduced  to  500, 
leaving  a  net  profit  of  only  $140.  He  decides  to 
reduce  the  price.  At  ten  cents  the  sales  are  in- 
creased to  10,000,  giving  a  net  profit  of  $800. 
At  five  cents  12,000  may  be  sold,  w^ith  a  net  profit 
of  $360.  Again  the  price  is  raised  to  fifteen  cents 
and  5,000  traps  are  sold,  leaving  a  profit  of  $650. 
Plainly  ten  cents  is  the  most  profitable  price  and 
the  monopolist  after  all  these  experiments  will 
probably  decide  to  fix  the  price  at  that  point.  If 
now  the  patent  should  expire  and  competitors 
should  enter  the  field,  it  is  probable  that  the  price 
■would  fall  to  five  cents,  a  price  which  would  yield 
a  fair  profit  but  not  a  monopoly  profit.  Extreme 
competition  might  even  reduce  the  price  below 


10      MONOPOLIES    PAST   AND    PRESENT. 

two  cents  but  as  a  rule  the  price  would  not  fall 
below  the  cost  of  production  plus  a  margin  of 
profit  sufficient  to  make  it  worth  while  for  a  man- 
ufacturer to  produce  the  article. 

We  may  then  say  that  in  general  competitive 
prices  are  governed  by  the  cost  of  production, 
while  monopoly  prices  are  regulated  by  the  desire 
of  the  monopolist  to  obtain  the  greatest  possible 
net  returns.  But  returns  depend  upon  sales  and 
sales  depend  upon  demand  and  demand  is  condi- 
tioned by  needs  and  needs  are  usually  finite  and 
limited  in  their  nature.  A  monopoly  is  therefore 
limited  in  its  power  and  not  absolute  except  in 
the  most  extraordinary  and  exceptional  cases.  If 
a  starving  man  with  a  bag  of  gold  meets  in  the 
desert  a  man  with  no  gold  but  with  bread 
and  water,  the  man  who  has  food  and  drink 
has  a  complete  and  absolute  monopoly  of  the 
same  and  can  fix  his  OAvn  price.  He  can  ob- 
tain for  his  bread  and  water  all  the  other  man's 
gold  and  a  promissory  note  for  all  his  worldly 
goods.  In  ordinary  business  life  such  conditions 
do  not  exist.  If  I  cannot  buy  a  good  mouse-trap 
for  ten  cents  I  will  content  myself  with  a  poor 
one.  If  I  cannot  obtain  any  mouse-trap  at  a 
reasonable  price  I  will  improvise  a  trap  or  will 
poison  the  mice  or  will  adopt  a  cat.  If  I  can 
in  no  way  exterminate  the  mice  without  great 
expense  I  will  even  let  them  wander  at  will  or 


THE  NATURE  OF  MONOPOLY.  11 

try  to  starve  them  out  by  putting  meat  and  drink 
beyond  their  reach.  The  would-be  monopolist 
must  take  these  facts  into  consideration.  In  or- 
der to  have  a  complete  monopoly  of  certain 
mouse-traps  he  must  needs  have  a  monopoly  of 
all  mouse-traps,  of  all  possible  substitutes  and  of 
all  human  ingenuity  and  patience.  Similarly  a 
monopoly  of  food  stuffs  is  seldom  more  than  a 
very  limited  and  temporary  monopoly.  A  corner 
in  wheat  would  be  highly  successful  if  it  enabled 
the  speculator  to  raise  the  market  price  of  wheat 
by  ten  cents  and  to  keep  it  there  until  he  had 
disposed  of  his  perilous  load.  In  order  to  raise 
the  price  by  fifty  cents  and  to  keep  it  there  for 
any  considerable  time  he  would  need  to  control 
a  large  portion  of  the  world's  supply  of  wheat. 
If  the  price  went  too  high  many  people  would 
eat  bread  made  of  Indian  corn,  or  rye,  or  oats,  or 
potatoes,  or  they  would  adopt  a  carnivorous  diet. 
To  obtain  complete  control  of  the  price  of  wheat 
the  monopolist  would  need  to  have  complete  con- 
trol of  wheat  and  corn  and  oats  and  rye  and  pota- 
toes and  beef  and  pork  and  all  other  meats  and 
all  fruits  and  all  possible  foods.  Even  where  the 
monopoly  is  complete  as  regards  the  article  sold, 
the  power  of  the  monopolist  is  very  limited  in 
regard  to  the  control  of  prices.  A  tramway  com- 
pany may  have  a  complete  monopoly  of  trans- 
portation by  tramway  within  the  limits  of  a  city 


12  MONOPOLIES   PAST   AND    PRESENT. 

and  yet  find  itself  unable  to  secure  its  greatest 
profit  at  a  higher  rate  than  five  cents.  At  a 
higher  rate  than  this  many  people  will  use  bi- 
cycles or  cabs  or  private  carriages  or  they  will 
walk  or  they  will  stay  at  home.  In  short,  all 
monopolies  are  more  or  less  limited  in  their  na- 
ture and  effects.  The  monopolist  must  be  con- 
tent with  a  limited  control  over  prices,  but  when 
any  person  has  obtained  such  limited  control  it 
is  proper  to  say  that  he  is  a  monopolist  to  the 
extent  of  his  ability. 

Although  it  is  true  that  monopoly  is  almost 
everywhere  present,  it  is  not  true  to  say  that  all 
property  involves  monopoly.  Property  is  due 
to  appropriation  and  appropriation  involves  ex- 
clusive possession  but  it  does  not  necessarily  give 
the  possessor  of  a  piece  of  property  any  exclusive 
control  over  the  supply  of  similar  pieces  of  prop- 
erty, nor  any  control  over  the  market  price  of 
such  property.  If  a  savage  becomes  the  possessor 
of  a  bark  canoe  and  if  that  is  the  only  such 
canoe  in  existence  and  if  the  other  savages  do  not 
know  how  to  make  similar  canoes,  the  fortunate 
eavage  is  to  some  extent  a  monopolist.  He  can 
control  the  price  of  his  canoe  up  to  the  point  of 
the  offer  of  the  most  eager  buyer.  Beyond  that 
his  control  of  price  cannot  go.  If  he  demands 
fifty  beaver  skins  for  his  canoe,  while  the  most 
eager  buyer  will  give  but  forty,  no  transaction 


THE  NATURE  OF  MONOPOLY.  13 

takes  place  and  the  power  of  the  monopolist  is 
at  an  end.  If  now  a  dozen  other  savages  con- 
etruct  canoes  as  good  as  the  first,  the  price  of 
canoes  will  no  longer  be  regulated  by  a  single 
owner  but  by  competition  between  thirteen  own- 
ers. The  price  will  no  doubt  fall,  unless  the  de- 
mand be  greatly  increased.  In  this  case  there  is 
twelve  times  as  much  property  but  no  monopoly 
at  all,  unless  the  owners  agree  among  themselves 
in  an  effort  to  fix  the  price.  There  is  sale  but 
no  exclusive  sale.  A  single  savage  may  value 
his  canoe  very  highly  and  may  demand  an  absurd 
price  for  it  but  he  will  be  unable  to  sell  it  unless 
he  can  find  an  ignorant  and  credulous  purchaser. 
If,  however,  one  of  the  competing  savages  is  able 
to  make  canoes  of  such  excellence  as  to  surpass 
all  others  and  to  command  a  peculiar  price  in  the 
market,  an  element  of  monopoly  appears  again. 
There  is  no  monopoly  of  canoes  in  general  but 
there  is  a  monopoly  of  this  particular  make  of 
canoes.  In  any  case  the  monopoly  is  not  due  to 
ownership  alone,  but  to  exclusive  ownership  and 
an  effective  demand  resulting  in  control  of  price. 
Property  may  or  may  not  involve  monopoly. 
This  is  no  fault  of  the  owners  of  property,  who 
would  gladly  be  monopolists  as  well. 

"We  must  also  distinguish  between  scarcity  price 
and  monopoly  price.  All  monopoly  depends  upon 
scarcity  but  scarcity  does  not  always  involve  mo- 


14  MONOPOLIES    PAST   AND    PRESENT. 

nopoly.  Eggs  may  be  scarce  in  December  and 
the  price  may  rise,  even  to  a  great  height,  without 
any  collusion  or  agreement  between  farmers  or 
dealers.  On  the  other  hand,  the  rise  in  price  may 
be  due  to  an  artificial  scarcity  produced  by  some 
capitalist  who  has  obtained  a  "  corner  "  in  eggs. 
The  latter  case  would  be  a  case  of  monopoly,  but 
not  the  former.  Diamonds  are  naturally  scarce 
and  therefore  bring  a  high  price.  If  it  is  true 
that  the  owners  of  the  South  African  diamond 
mines  restrict  the  production  of  diamonds  and 
thereby  limit  the  supply  in  order  to  maintain  the 
price,  then  we  may  say  that  part  of  the  price  of 
diamonds  is  due  to  an  artificial  scarcity  produced 
by  monopoly.  The  De  Beers  company  controls 
the  price  of  diamonds  because  it  produces  the 
greater  part  of  the  world's  supply  and  it  pos- 
sesses the  powers  of  monopoly  to  the  extent  of 
the  control.  It  has  a  permanent  "  corner  "  in 
diamonds,  based  upon  ownership  of  the  source  of 
supply. 

The  price  of  land  is  in  general  due  to  natural 
scarcity  and  not  to  monopoly.  In  the  neighbor- 
hood of  a  growing  city  the  price  of  land  rises  with 
the  growth  of  the  city.  This  is  due  to  the  in- 
creased utility  of  the  land  and  to  the  consequent 
eagerness  of  people  to  buy  it.  The  owners  do 
not  possess  or  exercise  any  control  over  the  price, 
as  long  as  they  compete  with  one  another  in  the 


TEE  NATURE  OF  MONOPOLY.  15 

eale  of  their  lands.  The  price  of  one  acre  is  the 
eame  as  that  of  another  acre  in  a  similar  location. 
But  when  the  owners  combine  to  regulate  prices, 
or  when  one  man  obtains  possession  of  a  large 
quantity  of  land,  thereby  obtaining  a  "  control- 
ling interest,"  we  rightly  say  that  monopoly  ex- 
ists. Even  the  owner  of  a  single  corner  lot,  or 
other  small  but  favorably  situated  piece  of  land, 
may  at  times  possess  a  monopoly.  As  long  as 
there  are  other  corner  lots,  equally  well  situated 
and  for  sale  by  independent  owners,  without  ex- 
pressed or  tacit  agreement,  no  one  of  them  has  a 
monopoly  but  when  they  combine  to  raise  or 
maintain  prices  or  when  all  the  land  is  built  upon 
except  one  corner  lot,  then  monopoly  exists,  at 
least  to  some  extent.  The  owner  of  such  a  lot, 
provided  the  demand  continues,  has  a  partial  and 
somewhat  insignificant  monopoly.  The  owners 
of  inferior  land  may  compete  with  him  but  not 
upon  equal  terms.  The  owners  of  similar  land 
with  buildings  on  it  may  compete  but  also  upon 
unequal  terms.  The  price  that  he  can  demand 
and  secure  is  the  price  offered  by  the  most  eager 
buyer,  whereas  if  there  were  two  sellers  the  price 
would  be  competitive  on  both  sides  and  the  most 
eager  buyer  might  not  need  to  pay  as  much  as 
he  would  be  willing  to  pay. 

Any  economic  good  may  be  the  subject  of  mo- 
nopoly, whether  it  be  a  thing  or  a  material  serv- 


16  MONOPOLIES   PAST   AND    PRESENT. 

ice  or  a  personal  service.  A  "  corner  "  in  wheat 
involves  the  monopoly  of  a  thing.  The  control 
of  railway  transportation  is  a  monopoly  of  mate- 
rial services.  The  monopoly  acquired  by  a  trade- 
union,  when  it  obtains  control  over  the  rate  of 
wages,  is  a  monopoly  of  personal  services.  In 
all  these  cases  the  principle  is  the  same.  By  con- 
trolling the  supply  or  the  demand  the  monopolist 
controls  the  price. 

An  important  distinction  is  that  between  per- 
manent and  temporary  monopolies  or  rather  be- 
tween more  and  less  temporary  monopolies.  In 
their  very  nature  monopolies  are  in  general  tem- 
porary. A  corner  is  the  most  temporary  of  all. 
Like  Jonah's  gourd,  it  springs  up  in  a  night  and 
perishes  in  a  night.  A  patent  is  valid  only  for  a 
term  of  years,  as  is  also  a  copyright.  A  railway  is 
perhaps  as  permanent  as  any  monopoly,  yet  we 
know  that  in  time  competing  lines  will  be  built. 
A  monopoly  of  land  is  quite  permanent,  yet  in 
time  great  estates  are  broken  up  and  competi- 
tion takes  the  place  of  exclusive  control.  Trusts 
and  pools  are  formed  to-day;  to-morrow  they 
break  down  and  competition  is  renewed.  Con- 
solidations are  completed  only  to  raise  up  a  con- 
Bolidated  competition.  Monopolies  may  be  said 
to  be  in  a  state  of  unstable  equilibrium.  Yet  they 
are  now  more  stable  than  formerly  and  they  are 
likely  to  become  still  more  stable,  still  more  per- 
manent. 


TEE  NATURE  OF  MONOPOLY.  11 

The  monopolist  may  be  one  person  or  more 
than  one.  It  may  be  a  company  or  a  combina- 
tion of  companies.  It  may  be  the  government  of 
a  to^vn,  a  state  or  a  nation.  The  United  States 
government  has  a  monopoly  of  the  postal  service. 
It  has  control  of  federal  taxation.  It  has  exclu- 
sive control  of  the  army  and  navy.  It  regulates 
at  will  the  administration  of  federal  justice.  In 
all  these  and  in  other  departments  the  federal 
government  exercises  powers  of  monopoly  by  con- 
trolling the  supply  and  demand  of  commodities 
and  services  and  by  regulating  the  prices  of  them. 
A  national  government  is  the  most  powerful  of 
all  monopolists.  Many  cities  own  and  manage 
their  own  water-works,  gas-works  and  tramways, 
their  streets,  sewers  and  bridges  and  owning  them 
they  exercise  the  powers  of  monopoly. 

The  seller  of  an  economic  good  is  not  always 
the  monopolist.  The  grocer  who  sells  coal-oil  is 
not  the  monopolist,  but  only  his  agent.  Thus 
it  is  with  agents  and  officials  of  all  sorts.  There 
is  a  power  behind  the  throne.  A  tramway  com- 
pany may  or  may  not  be  a  monopolist.  If  the 
tramway  company  fixes  its  own  rates,  regulates 
its  own  service  and  provides  accommodation  for 
the  public  in  its  own  way,  without  the  influence 
of  a  competing  line  or  of  the  city  government, 
then  it  is  a  monopolist  indeed.  If,  however,  these 
matters  are  all  regulated  by  the  city  government, 

2 


18  MONOPOLIES   PAST   AND    PRESENT. 

then  is  the  company  merely  the  paid  agent  of 
the  city  government,  which  is  the  real  monopolist. 
"Where,  as  is  usually  the  case,  the  city  govern- 
ment controls  the  business  of  the  tramway  com- 
pany only  in  part,  leaving  much  of  the  control 
in  the  hands  of  the  company,  then  we  may  say 
that  the  powers  of  monopoly  are  divided.  The 
monopoly  is  dual,  two-headed.  One  head  is  the 
company,  the  other  the  city  government. 

If  we  seek  for  the  primary  and  fundamental 
cause  of  monopolies,  that  cause  is  not  hard  to 
find.  It  appears  on  the  surface  of  human  nature 
and  is  deep  seated  in  the  human  heart.  People 
like  large  profits  because  they  like  sm.all  profits. 
Business  men  habitually  buy  in  the  cheapest  mar- 
kets and  sell  in  the  dearest.  They  are  well  pleased 
when  they  can  make  the  cheapest  markets  cheaper 
and  the  dearest  markets  dearer.  Their  annual 
profits  are  dear  to  them  as  life  itself.  They  repre- 
sent the  necessaries  and  luxuries  of  life,  peace 
at  home,  honor  abroad,  comfort  in  old  age  and 
all  the  amenities  of  life  for  themselves,  their  wives 
and  their  children.  When  a  man  finds  that  he 
can  raise  the  price  of  what  he  has  to  sell  or  lower 
the  price  of  what  he  desires  to  buy,  he  is  very 
apt  to  take  advantage  of  his  power  without  re- 
gard to  that  undefined  and  indefinable  something, 
commonly  known  as  a  fair  price.  He  is  apt  to 
think  that  a  fair  price  is  as  much  as  he  can  get 


THE  NATURE  OF  MONOPOLY.  19 

or  as  little  as  he  need  pay  and  when  by  means 
of  his  financial  strength  he  is  able  to  put  a  pres- 
ure  upon  his  weaker  competitor  and  even  crush 
him  to  the  earth  he  quotes  in  his  defense  the 
mercantile  version  of  the  golden  rule,  "  Do  unto 
the  other  feller  the  way  he'd  like  to  do  unto 
you  —  an'  do  it  fust."  While  economic  condi- 
tions are  as  they  are  it  is  wise  to  be  sparing  in 
administering  praise  or  blame  to  people  who  live 
within  the  letter  of  the  law,  who  take  as  much 
as  the  law  allows  and  give  as  little  as  th§  law 
requires.  These  legal  people  may  or  may  not 
be  moral  but  who  is  to  be  their  judge?  Who 
is  to  pluck  out  the  mote?  Who  is  to  remove  the 
beam?  "  He  that  is  without  sin  let  him  cast  the 
first  stone." 


II. 

MONOPOLIES  IN  ANCIENT  AND 
MEDIAEVAL  TIMES. 


J.  p.  Mahaffy,  "  Social  Life  in  Greece,"  London,  1888. 

W.  S.  Lindsay,  "  History  of  Merchant  Shipping  and 
Ancient  Commerce,"  Vol.  I,  London,    1874. 

Augustus  Boeckh,  "  The  Public  Economy  of  Athens," 
London,  1842. 

W.  CuNNixGiiAM,  "The  Growth  of  English  Industry  and 
Commerce,"  Vol.   I,  Cambridge,    1890. 

W.  J.  Ashley.  "  An  Introduction  to  English  Economic  His- 
tory and  Theory,"  London,  1893. 

"  Earper's  Dictionary  of  Classical  Literature  and  Antiqui- 
ties." 


22 


CHAPTER  II. 

MONOPOLIES   IN  ANCIENT  AND  MEDIEVAL 
TIMES. 

Historians  have  in  the  past  given  ns  but  little 
insight  into  the  daily  life  of  the  people.  They 
have  described  the  startling  events  that  lie  on 
the  surface  of  a  nation's  history  and  have  said 
little  or  nothing  of  the  economic  conditions  be- 
neath the  surface.  The  former  are  superficial, 
the  latter  fundamental.  The  startling  events  are 
but  effects,  of  which  economic  conditions  are  the 
causes.  We  know  much  about  wars,  politics,  he- 
roes, statesmen,  kings,  nobles  and  the  like,  but 
we  have  little  knowledge  of  farmers,  fishermen, 
miners,  artisans,  merchants,  methods  of  business, 
domestic  and  foreign  commerce.  If  we  knew 
more  about  these  things  we  could  understand  his- 
tory better  and  learn  more  from  the  study  of  it. 

Because  of  this  misdirection  of  energy  on  the 
part  of  historians  and  chroniclers  it  is  very  hard 
to  obtain  any  definite  information  about  the  eco- 
nomic history  of  ancient  and  medieeval  times. 
Yet  we  know  that  economic  conditions  did  exist. 
Although  the  organiation  of  society  was  largely 
military  in  its  character,  this  military  organiza- 

.  tion  did  not  at  first  exist  for  its  own  sake  bi^t  for 

23 


24      MONOPOLIES    PAST    AND    PRESENT. 

the  protection  of  life  and  property  and  for  the 
increase  of  wealth  by  conquest.  Wars  of  con- 
quest were  for  slaves,  for  tribute,  for  land  and 
for  the  extension  of  commerce.  Other  objects 
were  subordinate  to  these. 

From  the  points  of  view  of  politics,  religion 
and  literature  we  distinguish  between  ancient 
and  mediaeval  history.  From  the  point  of  view 
of  economic  history  it  is  hard  to  draw  any  clear 
line  of  demarcation.  From  the  time  of  the  Pha- 
raohs to  the  discovery  of  America,  if  not  to  the 
beginning  of  the  industrial  revolution  in  the 
eighteenth  century,  there  was  no  sudden  or  very 
rapid  change  in  the  methods  of  agriculturists, 
fishermen,  miners,  craftsmen  or  merchants  and 
the  ancient  economic  conditions  have  survived  in 
countries  like  China  until  the  present  day.  Un- 
der such  primitive  conditions  we  cannot  expect 
to  find  and  we  do  not  find  a  highly  developed 
system  of  transportation  by  sea  and  land,  a  postal 
union,  an  electric  telegraph  or  a  modern  trust. 
Modern  monopolies  are  the  result  of  modern  in- 
dustrial progress  and  are  of  recent  origin.  In 
early  times  there  were  monopolies  but  they  were 
primitive  in  their  nature.  We  read  of  royal  mo- 
nopolies of  brick  and  'syenite  and  papyrus  in 
Egypt,  of  royal  monopolies  of  wheat  and  purple 
among  the  Phoenicians,  of  state  monopolies  of 
lead^mines  and  of  banking  among  the  Greeks,  of 


MONOPOLIES  IN  ANCIENT  TIMES.  25 

various  state  monopolies  in  Rome,  notably  the 
monopoly  of  salt.  By  means  of  these  monopolies 
the  governments  of  ancient  times  derived  a  con- 
siderable part  of  their  revenue.  When  conquests 
took  place  the  conquered  territory  was  exploited 
for  the  benefit  of  the  conquerors.  Rome  thus  be- 
came the  great  monopolist  of  the  world,  when  the 
most  distant  provinces,  as  well  as  the  nearest, 
were  drained  of  their  wealth  to  feed  and  amuse  the 
Roman  populace.  Farmers  of  the  revenue  were 
monopolists  in  a  stricter  sense,  for  they  made  use 
of  their  exclusive  privileges  to  exact  the  utter- 
most farthing  and  after  that  to  require  in  taxes 
and  blackmail  more  than  the  law  allowed.  No 
wonder  that  people  spoke  of  "  publicans  and  sin- 
ners." The  spirit  of  monopoly  pervaded  foreign 
commerce.  For  a  thousand  years  the  merchants 
of  Tyre  and  Sidon  maintained  exclusive  privileges 
of  trade  throughout  the  greater  part  of  the  Medi- 
terranean and  the  Black  Sea  and  in  later  times 
the  commercial  supremacy  and  the  monopolistic 
spirit  of  Carthage  brought  about  the  unshaken 
conviction  of  the  Roman  C'ato  that  "  Carthage 
must  be  destroyed." 

The  modern  "  corner "  was  not  unknown  in 
ancient  times.  We  find  at  least  two  characteris- 
tic examples  mentioned  in  the  Old  Testament, 
One  account  describes  Esau  returning  from  the 
chase   in   a   famished   condition   and   asking   his 


26      MONOPOLIES    PAST   AND    PRESENT. 

brother  Jacob  for  the  means  of  subsistence. 
Jacob  appears  to  have  had  control  of  the  food 
supply  and  to  have  taken  advantage  of  his  mo- 
nopoly to  the  full  extent.  The  price  was  fixed 
by  Jacob.  He  demanded  his  brother's  birth- 
right and  the  price  was  not  denied  him.  Jacob's 
son  Joseph  seems  to  have  inherited  his  father's 
business  ability.  By  means  of  a  lucky  dream 
he  became  a  royal  grain  dealer  in  Egypt.  When 
wheat  was  plentiful  he  bought  largely  at  market 
prices.  When  wheat  become  scarce  Joseph  did 
not  hasten  to  sell.  W^hen  all  the  other  corn 
dealers  had  sold  their  stock  the  people  came  to 
Joseph  as  the  sole  source  of  supply.  Joseph  sold 
them  corn  at  prices  fixed  by  himself  and  so  high 
was  the  price  that  during  the  first  year  of  famine 
the  people  paid  all  their  money  to  the  monopolist. 
During  the  second  year  they  paid  their  horses, 
their  flocks,  their  cattle  and  their  asses.  At  last 
they  gave  their  land  and  sold  themselves  as  slaves 
to  Pharaoh.  That  events  such  as  this  were  com- 
mon in  those  days  can  hardly  be  doubted.  Fam- 
ines were  frequent  and  prudent  speculators  had 
many  opportunities  for  obtaining  monopolistic 
gains.  That  grain  dealers  among  the  Israelites 
were  not  uncommonly  monopolists  as  well,  is  evi- 
dent from  the  proverb,  "  He  that  withholdeth 
corn  the  people  shall  curse  him,  but  blessing  shall 
be  upon  the  head  of  him  that  selleth  it." 


MONOPOLIES  IN  ANCIENT  TIMES.  27 

Grain  dealers  have  been  regarded  with  suspic- 
ion at  all  times,  especially  in  countries  subject  to 
famine,  or  where  the  supply  of  grain  came  from 
abroad.  The  Athenians  were  especially  jealous 
of  the  corn  factors  who  bought  grain  from  the 
ships  at  the  Pirasus  and  sold  it  in  Athens  at  ad- 
vanced prices.  It  was  claimed  that  they  com- 
bined with  one  another  to  secure  high  prices. 
The  services  rendered  by  them  were  overlooked, 
especially  in  times  of  scarcity.  It  w^as  asserted  that 
they  often  sold  on  the  same  day  grain  they  had 
purchased,  obtaining  a  profit  of  a  drachma  (19c.) 
on  the  medimnus  (ll  bush.).  This  was  considered 
exorbitant.  Laws  were  made  to  control  prices  and 
profits.  No  dealer  w^as  to  be  allowed  to  buy  more 
than  fifty  phormi  (baskets)  of  grain  at  a  time  and 
he  was  not  to  charge  more  than  an  obol  (3c.)  as 
profit  upon  each  basket.  The  state  appointed  offi- 
cers called  sitophylaces  to  oversee  the  grain  trade 
in  Athens  and  the  Piraeus  and  to  have  inspection 
also  of  bread  and  meal.  In  the  time  of  the  orator 
Lysias  a  number  of  corn  factors  were  accused  of 
having  bought  up  a  large  quantity  of  grain  and  of 
having  sold  it  at  too  great  a  profit.  Lysias  made 
a  violent  speech  against  them,  demanding  that 
they  be  put  to  death.  He  describes  their  practices 
in  words  that  sound  strangely  modern.  "  They 
buy  up  grain,  under  the  pretence  of  caring  for  the 
public  welfare  or  of  having  a  commission  from 


28     MONOPOLIES   PAST   AND    PRESENT. 

the  magistrates.  But  when  a  war  tax  is  imposed, 
their  pretended  public  spirit  is  not  maintained. 
They  gain  by  the  public  calamities.  They  are  so 
well  pleased  with  them  that  they  have  the  first 
news  of  them  or  even  invent  news,  as  for  instance 
that  the  ships  in  the  Pontus  have  been  taken  or 
destroyed,  that  ports  are  closed,  that  treaties  are 
revoked.  Even  when  the  enemy  are  quiet  they 
harass  the  citizens  by  accumulating  grain  in  their 
Btorehouses  and  by  refusing  to  sell  in  time  of  the 
greatest  scarcity  in  order  that  the  citizens  may 
not  dispute  A\'ith  them  about  the  price,  but  may 
be  glad  to  procure  grain  at  any  price.  In  the 
case  of  other  criminals  ye  have  to  learn  their 
offence  from  the  accusers,  but  the  wickedness  of 
these  men  ye  all  know.  If  then  ye  condemn  them 
ye  will  act  justly  and  make  corn  cheaper,  but  if 
not,  dearer."  The  orator  displays  great  ignorance 
of  the  natural  laws  which  control  the  rise  and  fall 
of  prices  or  he  completely  ignores  them  but  it 
is  evident  that  the  grain  dealers  of  his  day,  like 
those  of  modern  times,  were  not  averse  to  obtain- 
ing control  of  prices  when  they  could. 

A  real  and  somewhat  permanent  monopoly  of 
grain  was  held  by  Cleomenes,  Alexander's  satrap 
of  Egypt.  Through  his  command  of  the  world's 
granary  he  accumulated  great  hoards  of  grain 
and  was  able  to  control  prices  throughout  the 
Mediterranean  countries  by  sending  his  ships  only 


MONOPOLIES  IN  ANCIENT  TIMES.  29 

to  places  where  grain  was  scarce  and  prices  high. 
He  is  said  to  have  bought  grain  at  ten  drachmas 
and  to  have  sold  it  at  thirtv-two  drachmae.  In 
Athens  prices  rose  considerably,  until  grain  was 
imported  from  (Sicily  when  competition  was  re- 
established. 

During  the  Middle  Ages,  as  well  as  in  Ancient 
times,  the  people  at  large,  learned  and  simple, 
looked  with  suspicion  upon  the  business  methods 
of  merchants  or  middle  men.  They  were  not  sup- 
posed to  perform  any  great  service  to  the  com- 
munity and  their  profits  were  thought  to  partake 
of  the  nature  of  robbery.  The  practice  of  "  fore- 
stalling," or  buying  directly  from  the  producers 
for  future  sale,  was  considered  disreputable. 
When  a  merchant  intercepted  peasants  on  the 
way  to  market  and  bought  their  pigs,  sheep,  hides, 
vegetables  and  grain  for  the  purpose  of  selling 
them  again  in  the  open  market,  it  was  thought 
that  he  had  taken  an  unfair  advantage  of  his  fel- 
low-townsmen. The  country  people  ought  to  be 
allowed  to  come  to  market  and  to  stay  there  until 
the  townspeople  had  bought  all  they  needed  at  low 
prices. 

After  that,  if  anythifig  were  left,  the  hucksters 
might  buy  it  up  and  keep  it  for  future  sale  and 
the  farmers  might  go  home  in  peace.  Forestall- 
ing was  monopoly  and  robbery.  The  good  citizens 
forgot    that    when    the  merchant    relieved    the 


30  MONOPOLIES   PAST   AND    PRESENT. 

farmer  of  his  products  he  performed  a  service  to 
the  farmer  and  to  the  citizen  as  well  and  that 
the  merchant's  profits  were  in  general  little  more 
than  the  equivalent  of  wages  for  services  ren- 
dered. It  is  doubtless  true  that  the  merchant  did 
at  times  obtain  unusual  profits,  due  to  some  tem- 
porary monopoly.  Because  of  these  occasional 
corners  and  because  of  the  riches  of  successful 
merchants,  the  methods  whereby  they  obtained 
their  wealth  were  considered  nefarious  to  the  last 
degree.  Inseparable  from  successful  forestalling 
was  the  practice  of  "engrossing"  or  buying  at 
wholesale  and  this  was  also  thought  to  be  a  dis- 
honorable or  at  least  a  questionable  practice. 
The  man  who  buys  in  large  quantities  often  ob- 
tains control  of  the  market  price  to  the  detriment 
of  the  consumer  who  buys  at  retail  and  perhaps 
to  the  injury  of  his  fellow-merchants,  who  are  un- 
able, because  of  limited  capital,  to  deal  on  so  large 
a  scale.  Forestallers,  engrossers  and  regraters 
were  alike  feared  and  hated  by  the  people. 

Just  as  the  Athenians  made  laws  against  the 
corn  factors,  so  the  mediaeval  town  governments 
and  even  the  national  governments  often  enacted 
stringent  laws  against  forestallers  and  engrossers 
of  commodities  of  all  kinds.  A  typical  case  is 
recorded  in  the  reign  of  Edward  III.  It  appears 
that  the  hotel-keeper  of  Yarmouth  had  been  in 
the  habit  of  making  special  bargains  with  the  fish- 


MONOPOLIES  IN  ANCIENT  TIMES.  31 

ermen  and  thus  forestalling  the  fish  before  they 
were  exposed  for  sale  in  the  open  market  and  even 
before  they  were  landed.  A  statute  was  there- 
fore passed  in  the  year  1357,  fixing  a  maximum 
wholesale  price  and  the  rate  of  profit  on  re-selling 
and  requiring  the  fishermen  personally  to  sell 
their  fish  on  the  open  market.  The  statute  was  a 
failure.  Besides  the  difficulty  of  enforcing  the 
law,  it  was  found  that  the  fishermen  could  do 
better  by  spending  their  time  in  fishing,  rather 
than  in  selling  on  the  market  and  that  the  con- 
sumers did  not  gain  what  the  forestallers  lost. 

During  the  latter  part  of  the  fifteenth  century 
and  the  beginning  of  the  sixteenth  century,  there 
was  a  general  rise  in  prices  throughout  England, 
largely  due  to  debasement  of  the  coinage  but 
popularly  attributed  to  combination  among  pro- 
ducers and  middle  men.  The  landowners  were 
said  to  have  combined  to  raise  rents.  The 
graziers  were  accused  of  having  combined  to 
keep  up  the  price  of  wool.  The  laborers  were 
supposed  to  have  united  to  secure  higher  wages. 
The  merchants  were  said  to  have  combined  to 
engross  commodities  in  general.  In  the  reign  of 
Edward  VI,  severe  laws  were  passed  against  the 
engrossing  of  "  corn,  wine,  fish,  butter,  cheese, 
candles,  tallow,  sheep,  lambs,  calves,  swine,  pig3, 
geese,  capons,  hens,  pigeons  and  conies."  It  is 
not  recorded  that  these  laws  were  in  the  end  ef- 


32     MONOPOLIES   PAST   AND    PRESENT. 

fective  in  any  way  except  in  restraint  of  trade  and 
when  gold  and  silver  from  Spanish  America  began 
to  flow  into  the  channels  of  trade  it  became  evi- 
dent that  prices  might  rise  while  products  were 
plentiful  without  the  agency  of  forestallers  and 
engrossers. 

The  people  of  the  Middle  Ages  were  convinced 
that  producers  and  merchants  could  not  be  trusted 
to  sell  at  reasonable  prices.  They  made  a  distinc- 
tion between  a  fair  or  reasonable  price  and  the 
unfair  and  unreasonable  price  which  a  seller  could 
demand  and  get,  because  of  his  control  of  the 
supply  of  a  commodity  or  because  of  shrewd 
bargaining  and  the  ignorance  of  buyers.  This 
unfair  price  was  often  what  we  now  call  monopoly 
price  but  more  often  it  was  nothing  but  a  scarcity 
price.  In  any  case  it  was  thought  necessary  to 
make  laws  fixing  reasonable  prices  and  the  legis- 
lation of  these  times  is  full  of  laws  regulating 
prices  and  fixing  rates. 

In  the  case  of  most  of  the  crafts,  prices  and 
rates  of  profit  were  in  general  regulated  by  their 
own  officers  but  the  "  victualling  crafts "  were 
subject  to  special  control  by  the  national  and 
civic  authorities.  As  early  as  the  time  of  Charle- 
magne we  find  in  Frankfort  an  ordinance  fixing 
a  maximum  price  of  corn  and  of  food,  without 
due  regard  to  good  or  bad  harvests.  In  general 
the  authorities  were  contented  to  allow  the  price 


MONOPOLIES  IN  ANCIENT  TIMES.  33 

of  corn  to  be  fixed  by  the  natural  relation  of  sup- 
ply and  demand,  but  they  insisted  on  controlling 
the  price  of  bread.  In  the  reign  of  Henry  II,  we 
find  in  England  what  was  called  the  Assize  of 
Bread.  According  to  this  law  the  weight  of  a 
farthing  loaf  of  bread  was  to  vary  with  the  price 
of  wheat.  When  wheat  was  low  the  farthing  loaf 
was  to  be  large  but  smaller  when  the  price  of 
wheat  was  high.  In  this  way  it  was  thought  pos- 
sible to  limit  the  baker  to  a  fair  profit  or  rather 
to  a  living  wage.  Similar  restrictions  were  im- 
posed by  the  Assizes  of  Ale  and  "Wine  and  there 
was  also  the  Assize  of  Cloth,  which  controlled  the 
length,  breadth  and  quality  of  cloth  and  a  special 
officer,  the  Aulnager,  had  authority  to  enforce  the 
law.  The  people  at  large  were  convinced  of  the 
necessity  of  vigorously  enforcing  the  assizes  in 
order  that  provisions  might  be  sold  at  fair  prices 
and  demanded,  with  Piers  Plowman,  that  delin- 
quent brewsters,  bakers,  butchers  and  cooks  be 
"  punished  on  pillories  and  pinning-stools." 

Similar  to  the  assizes  were  the  attempts  made 
to  regulate  wages,  especially  after  the  Black  Death 
of  1348,  which  is  said  to  have  destroyed  nearly 
half  of  the  entire  population  of  England,  causing 
a  terrible  scarcity  of  laborers.  The  Ordinance  and 
Statute  of  Laborers  of  1349  and  1351  enacted 
that  laborers,  carpenters,  masons,  plasterers,  shoe- 
makers   and    other    craftsmen    having   no    other 


34  MONOPOLIES   PAST   AND   PRESENT. 

means  of  livelihood  were  not  to  refuse  to  work 
for  anyone  offering  the  rate  of  wages  that  pre- 
vailed before  the  plague.  At  the  same  time  the 
law  fixed  maximum  prices  for  corn  and  other  food 
stuffs.  This  legislation  failed  to  produce  the  de- 
sired effect.  The  price  of  food  rose,  because  of 
scarcity  and  because  of  debasement  of  the  coin- 
age. Laborers  were  few.  They  could  not  live 
on  the  old  wages  and  they  would  not  accept  low 
wages  when  employers  were  competing  for  their 
services.  The  laws  worked  only  hardship  when 
they  were  enforced.  The  penalties  were  severe, 
imposing  fines  and  imprisonment  and  even  brand- 
ing with  the  letter  "  F "  when  the  laborer 
"  falsely  "  broke  faith  with  his  employer  and  es- 
caped to  other  service. 

The  doctrine  of  a  fair  price  and  a  fair  day's 
wage  for  a  fair  day's  work  was  supported  and  en- 
forced by  the  Church  according  to  the  principles 
of  the  Grospel  as  then  understood.  Thomas 
Aquinas  wrote  on  the  subject  as  early  as  the  thir- 
teenth century  and  the  economic  principle  of  the 
Church  became  an  integral  part  of  the  Canon  Law 
toward  the  end  of  the  fifteenth  century.  The 
churchmen  of  the  Middle  Ages  were  economists 
and  ethical  philosophers  as  well.  They  held  that 
economic  relations  between  man  and  man  ought 
to  be  and  might  be  also  just  relations.  They  be- 
lieved in  a  fair  wage,  a  wage  sufficient  to  maintain 


MONOPOLIES  IN  ANCIENT  TIMES.  35 

the  worker  and  his  family  according  to  the  stand- 
ard of  living  of  the  class  to  which  he  belonged. 
There  was  a  fair  wage  for  the  farm-laborer,  a 
different  wage,  also  fair,  for  the  artisan  and  a  still 
different  yet  equitable  wage  for  the  merchant.  A 
fair  price  was  such  a  price  as  would  enable  the 
seller  to  carry  on  his  business  and  to  maintain 
himself  at  the  customary  standard  of  living.  A 
fair  profit  was  such  a  profit  as  would  adequately 
reward  the  merchant  for  his  trouble  in  bringing 
his  wares  to  the  market.  According  to  Aquinas, 
"  Trade  is  rendered  lawful  when  the  merchant 
seeks  a  moderate  gain  for  the  maintenance  of  his 
household  or  for  the  relief  of  the  indigent  and 
when  his  trade  is  carried  on  for  the  public  good, 
in  order  that  the  country  may  be  furnished  with 
the  necessaries  of  life  and  the  gain  is  looked  upon 
not  as  the  object,  but  as  the  wages  of  his  labor." 
According  to  these  principles  it  was  thought 
advisable  to  fix  rates  of  wages  and  profit  and 
thereby  to  establish  fair  prices  and  thus  to  prevent 
excessive  competition,  on  the  one  hand,  and  the 
profits  of  monopoly  on  the  other.  Such  inter- 
ference with  trade  can  hardly  have  been  bene- 
ficial on  the  whole  and  must  have  hindered 
economic  progress.  The  laws  were  often  evaded 
but  often  enforced.  It  was  possible  to  enforce 
them  to  a  considerable  extent  in  those  days,  when 
to'vvTis  were  smaller  and  trade  was  almost  prim- 


36     MONOPOLIES   PAST   AND    PRESENT. 

itive  in  its  methods  and  extent.  There  must  be, 
as  the  Canonists  thought,  an  ideal  wage  for  every 
class  of  workers.  It  is  not  a  question  of  the  ex- 
istence of  the  ideal  as  an  ideal  but  of  the  possi- 
bility of  realizing  it. 

It  was  on  this  rock  that  the  mediaeval  public 
economy  struck  and  was  wrecked.  Under  the 
most  favorable  conditions  the  restrictions  were 
hard  to  enforce  and  the  rulers  were  obliged  to 
admit  of  many  exceptions  inconsistent  wdth  their 
theories.  As  trade  expanded  and  cities  grew  in 
population  and  wealth  and  as  foreign  commerce 
increased,  it  became  more  and  more  difficult  to 
maintain  the  old  system.  The  municipal  and 
manorial  economy  of  the  Middle  Ages  by  degrees 
gave  place  to  the  modern  system  of  unrestricted 
competition.  Competitive  prices  may  not  always 
be  fair  prices  but  the  injustice  is  thought  to  be 
exceptional  and  comparatively  insignificant.  On 
the  whole  and  in  the  long  run  it  is  held  that  free 
and  unrestricted  competition  will  secure  fair 
wages,  fair  profit  and  fair  prices,  favor  to  none, 
justice  to  all,  progress  and  prosperity  for  rich  and 
poor. 

The  world  moves  in  advancing  cycles.  First  we 
have  the  monopolistic  spirit  of  the  Middle  Ages. 
Then  we  have  the  competitive  spirit  of  the  indus- 
trial revolution.  Again  we  pass  into  a  period  of 
monopoly  and  restriction  of  competition.     In  the 


MONOPOLIES  IX  ANCIENT  TIMES.  37 

first  period  we  find  public  control  and  regulation 
of  industry.  In  the  second  period  we  have  the 
system  of  industrial  liberty.  May  it  not  be  that 
we  are  returning  to  a  system  of  public  control 
like  and  yet  unlike  that  of  Ancient  and  Mediaeval 
times?  The  doctrine  of  the  Canonists  revives  in 
the  teaching  of  modern  Socialists.  The  ideals  re- 
sume their  sway  over  the  human  mind,  new  in 
form  but  old  in  spirit.  As  ever  they  demand 
recognition,  they  call  for  realization. 


III. 

GILDS  AS  MONOPOLIES. 


Chables  Gross,  "The  Gild  Merchant,"  Oxford,  1890. 

J.  M.  Lambert,  "  Two  Thousand  Years  of  Gild  Life,"  Hull, 
1891. 

Cornelius  Walford,  "Gilds,"  London,  1888. 

W.  J.  Ashley,  "  An  Introduction  to  English  Economic  His- 
tory and  Theory,"  London,   1893. 

W.  Cunningham,  "  The  Growth  of  English  Industry  and 
Commerce,"  Vol.  I,  Cambridge,  1890. 

Lujo  Brentano,  "  The  Relation  of  Labor  to  the  Law  of 
To-day,"   (Trans.)   New  York,  1891. 


40 


CHAPTER  III. 

GILDS  AS  MONOPOLIES. 

The  word  gild  is  probably  derived  from  an  An- 
glo-Saxon word  meaning  to  pay.  The  same  word 
meant  also  io  worship.  Even  in  modern  times 
there  is  often  an  intimate  connection  between 
worship  and  payments.  The  gilds  were  unions  or 
clubs  or  organizations  or  associations  of  people, 
joined  together  for  specific  purposes  and  main- 
tained by  the  fees  or  contributions  of  the  mem- 
bers. 

The  earliest  Anglo-Saxon  gilds  were  religious 
and  social  in  their  nature,  existing  for  purposes 
of  worship,  for  burying  the  dead  or  for  the  cele- 
bration of  feasts.  Somewhat  later  were  the  frith 
gilds,  which  are  mentioned  as  early  as  the  begin- 
ning of  the  eighth  century.  These  were  organiza- 
tions of  men  for  mutual  protection  and  for  the 
capture  and  punishment  of  criminals.  It  appears 
that  the  formation  of  frith  gilds  was  encouraged 
by  the  Saxon  kings  and  that  every  freeman  was 
expected  to  belong  to  such  a  gild.  If  he  com- 
mitted a  crime  his  gild  brethren  were  expected  to 
bring  him  to  trial  and  to  become  sureties  for  the 
payment  of  fines  imposed  on  him.    If  he  were  in- 

41 


42      MONOPOLIES    PAST   AND    PRESENT. 

jiircd,  his  gild  brethren  endeavored  to  bring  the 
offender  to  justice.  The  gild  system  is  thus  seen 
to  be  an  expansion  of  the  more  ancient  family 
organization. 

Merchant  and  craft  gilds  appear  to  have  been 
of  later  origin.  There  is  the  barest  trace  of  them 
in  Saxon  times,  but  they  certainly  existed  in  early 
Norman  times.  It  has  been  stated  that  these 
gilds  must  have  had  their  origin  in  England.  This 
is  by  no  means  certain.  It  is  not  improbable  that 
they  may  have  originated  in  very  ancient  times. 
The  Eoman  collegia  and  sodalicia  appear  to  have 
been  similar  to  the  mediaeval  gilds.  As  early  as 
the  reign  of  iSTuma  no  fewer  than  eight  associa- 
tions of  craftsmen  existed  in  Rome,  flute  blowers, 
goldsmiths,  coppersmiths,  carj^enters,  fullers, 
dyers,  potters  and  shoemakers.  The  experience 
of  the  Apostle  Paul  at  Ephesus  points  to  an  or- 
ganization of  some  sort  among  the  silversmiths  of 
that  city.  Although  very  little  is  known  of  these 
ancient  societies,  it  may  be  that  they  existed  in 
the  towns  of  Gaul  and  Britain  and  in  other  parts 
of  the  Roman  Empire.  AVhen  the  German  tribes 
invaded  the  Roman  provinces  they  did  not  in  gen- 
eral destroy  the  to\\ms  and  the  germs  of  the  an- 
cient organizations  may  have  lingered  there,  to 
spring  up  wdth  renewed  vigor  in  the  eleventh  and 
twelfth  centuries.  We  find  mention  of  an  organi- 
zation of  locksmiths  in  a  French  town  as  early  as 


GILDS  AS  MONOPOLIES.  43 

the  fifth  century  and  a  corporation  of  bakers  is 
mentioned  in  the  time  of  Charlemagne  and  an 
association  of  goldsmiths  some  years  later. 

Whatever  may  have  been  the  origin  of  the 
gilds,  it  is  certain  that  they  played  an  important 
part  in  the  economic  life  of  the  Middle  Ages, 
especially  in  England,  where  their  liberties  and 
privileges  were  secured  against  feudal  encroach- 
ment by  the  favor  and  protection  of  the  kings. 
When  the  towns  obtained  charters  of  liberties  the 
powers  of  municipal  government  were  granted  to 
the  gilds.  It  is  thought  that  the  merchant  gilds  at 
first  obtained  control  of  the  town  government 
and  that  the  craft  gilds  were  afterward  admitted 
to  civic  power.  In  order  to  have  a  share  in  the 
government  of  the  town  it  was  necessary  for  an 
inhabitant  to  be  a  free  member  of  some  gild.  The 
gilds  had  therefore  a  monopoly  of  toAvn  govern- 
ment and  the  town  was  governed  in  the  interests 
of  the  gild  members.  Since,  however,  a  large  pro- 
portion of  the  residents  in  any  town  must  have 
been  members  of  one  or  other  of  the  gilds,  the 
to^\Ti  government  was  to  a  large  extent  demo- 
cratic in  its  nature.  It  was  not  until  later  times, 
when  the  population  of  towns  increased  and  the 
gilds  became  more  and  more  exclusive,  that  their 
monopoly  of  municipal  government  was  felt  to  be 
burdensome  and  oppressive. 

The  people  who  were  not  gild  members  then 


4:4:  MONOPOLIES    PAST   AND    PRESENT. 

began  to  demand  a  share  in  municipal  govern- 
ment. Gradually  the  modern  popular  system  of 
municipal  government  was  introduced  but  in  the 
city  of  London  at  the  present  day  the  ancient  gild 
eystem  still  survives  and  the  lord  mayor,  alder- 
men, councilmen  and  other  officials  of  the  City 
are  still  elected  by  the  members  of  the  livery  com- 
panies or  gilds.  The  twelve  great  livery  com- 
panies of  London  are  the  Mercers,  Grocers, 
Drapers,  Fishmongers,  Goldsmiths,  Skinners, 
Merchant-Taylors,  Haberdashers,  Salters,  Iron- 
mongers, Vintners  and  Cloth-workers.  The  mem- 
bers of  these  gilds  consist  of  merchants  and  gen- 
tlemen, few,  if  any  of  whom,  have  any  connection 
with  the  trade  to  which  they  nominally  belong. 
There  are  statesmen  who  are  mercers,  generals 
who  are  haberdashers,  scientists  who  are  fish- 
mongers. The  great  companies  of  London  are 
very  rich  and  very  exclusive  but  their  power  is 
now  comparatively  limited  and  is  gradually  pass- 
ing away. 

Among  the  earliest  craft  gilds  in  England  and 
on  the  Continent  were  the  gilds  of  weavers.  They 
are  mentioned  in  English  history  as  early  as  the 
year  1130.  In  the  year  1180  we  read  of  the  Lon- 
don gilds  of  goldsmiths,  butchers,  pepperers  and 
cloth-finishers.  By  the  end  of  the  thirteenth  cen- 
tury all  the  important  crafts  were  organized  into 
gilds.    At  that  time  there  were  in  London  no  less 


OILDS  AS  MONOPOLIES.  45 

than  sixty  companies  or  crafts,  each  with  its  own 
organization,  officers  and  rulers. 

The  craft  gilds  might  bo  called  mutual  benefit 
societies  or  associations  of  craftsmen  banded  to- 
gether for  the  furtherance  of  their  common  inter- 
ests. They  were  exclusive  associations.  As  a 
rule  no  man  could  become  a  shoemaker  unless  he 
entered  the  gild  through  the  doorway  of  appren- 
ticeship. "When  he  had  completed  seven  years, 
more  or  less,  of  bondage  under  a  master  shoe- 
maker, the  apprentice  became  a  journeyman  and 
was  permitted  to  work  for  other  masters.  When 
he  found  himself  able  to  acquire  a  shop  of  his 
own  and  to  establish  himself  in  business  he  became 
a  master  shoemaker  and  a  full  member  of  the 
gild.  He  paid  his  fees  at  stated  times  and  incurred 
fines  when  he  transgi'essed  the  rules.  He  made 
boots  and  shoes  according  to  the  standards  set 
by  the  officers  of  the  gild.  He  sold  them  at  prices 
fixed  by  the  same  authorities.  He  employed  as 
many  journeymen  and  apprentices  as  the  gild 
allowed.  He  paid  his  men  according  to  the  ap- 
pointed scale  of  wages.  He  attended  the  meetings 
of  the  gild  and  enjoyed  the  society  and  convivial- 
ity of  his  brethren.  At  the  annual  meeting  he 
voted  for  the  election  of  gild  officers,  whether  they 
were  called  wardens,  aldermen,  searchers,  over- 
seers, bailiffs  or  masters.  On  the  feast  day  of  the 
gild's  patron  saint  he  went  in  procession  to  the 


46  MONOPOLIES    PAST   AND    PRESENT. 

church.  In  time  of  war  he  marched  in  the  train- 
bands beside  the  brethren  of  his  craft.  In  poverty- 
he  received  aid  from  the  common  fund.  In  sick- 
ness his  brethren  visited  liim.  Dying  in  poverty 
he  was  buried  with  shoemakers'  rites  at  the  ex- 
pense of  the  gild,  while  the  same  benevolent  asso- 
ciation had  masses  said  for  the  repose  of  his  soul 
and  provided  for  the  support  of  his  widow  and 
orphan  children.  His  children  after  him  were 
shoemakers  unto  the  third  and  fourth  generation. 

The  gilds  were  known  by  a  variety  of  titles. 
In  the  history  of  the  gilds  of  Kingston  upon  Hull 
we  read  of  the  Company  of  Weavers,  the  Craft 
of  the  Glovers,  the  Mysterie  of  Berbruers,  the 
Gild  of  Tailors,  the  Fraternity  of  Carpenters,  the 
Society  of  Shipwrights,  the  Fellowshippe  of 
Cordwainers  and  Shoemakers,  the  Brotherhood 
of  Barber-surgeons. 

The  gild  regulations  were  as  various  as  their 
titles.  The  following  specimens  taken  from  the 
rules  of  various  trades  give  an  idea  of  the  objects 
sought  and  how  they  were  attained. 

"  No  one  to  take  a  felowe  to  work  without  con- 
sent of  the  Gild." 

"  Item,  that  no  man  sett  up  a  loome  within  hys 
howsse,  but  if  he  have  been  prentyse  VII  yere  at 
the  occupacon,  under  payne  of  ten  pounds." 

"  ISTon  alian  shall  worke  or  sett  up  in  this  town 
withoute  licence  of  the  mayre." 


OILDS  AS  MONOPOLIES.  47 

"  There  shall  no  woman  worke  in  any  warke 
concernyng  this  occupation  within  this  town." 

"  None  to  take  an  apprentice  or  workman 
aliant-born," 

"  None  to  sett  np  but  he  be  abled  by  the  alder- 
man and  the  searcheours." 

"  None  to  be  admitted  but  free  burgesses  of  the 
town  and  none  but  members  to  set  up  shop." 

"  No  person  shall  buy  any  lether  belonging 
to  the  glovers'  trade  to  sell  the  saime  again,  un- 
less he  be  a  free  burgess  and  free  of  the  said  com- 
pany of  glovers." 

"  It  shall  be  lawful  for  the  widow  of  any 
weaver  to  use  and  occupy  the  said  trade  by  her- 
self, her  apprentices  and  servants,  so  long  as 
she  continues  a  mdow." 

"  No  master  of  the  said  crafftt  to  take  a  pren- 
tice for  less  space  than  seven  years,  and  then  by 
indenture." 

"  No  person  or  persones  shall  buy  any  lether 
belonging  to  the  glovers  trade  here  or  ellswhere 
to  the  end  to  sell  the  same  again  within  this 
towne,  unless  he  be  free  burgess  and  free  of  the 
said  company  of  glovers." 

"  If  any  barber  who  is  a  foreigner  shall  draw 
teeth  in  any  part  of  the  to^vn  except  in  a  bar- 
ber's shop  he  shall  forfeit  twelve  pence  each 
time." 


48  MONOPOLIES   PAST   AND    PRESENT. 

"  Item  that  no  tallyor  give  no  garmente  to 
worke  or  sewe  to  anny  other  mans  servants  before 
he  departide  from  his  master's  service." 

"  Neither  that  any  musicion  not  free  burgess  of 
this  same  towne  and  free  of  the  saide  company 
of  goldsmiths  and  smithes  shall  within  this  town 
keep  any  daunsing  schoole." 

"  None  of  this  brotherhood  shall  have  above 
two  apprentices  at  once." 

"  No  inhabitant  within  this  towne  not  free  of 
the  saide  company  of  bakers  shall  bake  any  cakes 
to  the  end  to  sell  again  upon  paine  of  every  time 
two  shillings." 

"  A  showmaker  may  become  a  cobler,  but  must 
use  that  trade  of  coblinge  only." 

"  No  cobler  to  amend  shoes  or  bootes  with  bad 
stuffe  or  at  unreasonable  rates  or  keep  them 
longer  than  two  dales." 

"  Item  the  same  searchers  shall  well  and  dyli- 
gentlie  searche  and  trie  all  bowtes,  shoes,  bus- 
kynnes,  startuffes,  slippers  and  pantofles,  whether 
yat  they  be  maide  of  any  lether  but  of  lether 
well  and  trewlie  tanned  and  curried  or  of  lether 
well  and  trewlie  tanned  onlie  and  well  and  sub- 
stancyallie  sewd  with  good  threde,  well  twysted 
and  maide  and  sufficientlye  waxte  with  waxe  well 
rosened  and  the  stitches  harde  drawne  with  hande 
lethers." 

"  Searchers  to  viewe  and  search  all  lether  waire, 
to  seize  all  bad  work." 


0ILD8  AS  MONOPOLIES.  49 

"  Item  it  is  ordained  jat  none  of  yat  occupa- 
cion  be  at  any  debate  between  one  and  another 
contrarie  to  good  order,  but  to  be  lovinge  and 
friendlie  one  to  another." 

"  No  married  stranger  to  work  in  any  shop  on 
penalty  of  five  ponnds." 

"  No  strange  tailers  to  fetch  work  out  of  town 
to  make,  on  pain  of  five  shillings." 

"  No  butcher  or  cook  to  sell  other  than  nice 
looking  and  clean  food  under  penalty." 

"No  one  shall  set  any  woman  to  work  other 
than  his  wedded  wife  or  his  daughter." 

"  It  shall  be  lawful  to  mayor  and  alderman 
justices  at  all  tymes  to  sett  prices  of  doble  here 
and  merchante  here,  otherwise  called  shippebere." 

"  No  brother  to  take  any  boy  or  child  for  his 
second  apprentice  but  such  as  are  born  and  re- 
maining in  the  town." 

"  It  is  .ordayned  that  none  of  the  sayd  craft 
withholde  no  salary  fro  his  servant  on  a  certeyn 
day  of  payment  between  theym  appoynted." 

"No  maister  to  withhold  his  servant's  wages 
over  six  days." 

"  Not  to  work  after  9  P.  M.  on  Saturdays." 

"  Any  brother  suspecting  any  journeyman  of 
getting  married  to  report  to  the  mayor  and  dis- 
charge him  forthwith." 

"  Item  that  every  brother  of  this  saide  brother- 
hood shall  bring  up  reverentlie  their  servauntes 
in  the  feare  of  God." 


50  MONOPOLIES   PAST   AND    PRESENT. 

"  Every  brother  to  bring  liis  servants  and  pren- 
tices to  Church  on  the  Sabbath  and  to  restrain 
them  from  nnthriftely  using  taverns  and  ale- 
houses and  unhiwful  games." 

"  Any  craftsman  who  shall  brybe,  purloyne  or 
fitele  above  seven  pence  and  to  persist,  to  be  cast 
out  utterly  forever." 

"  Brethren  and  sisters  to  have  the  lights  at 
their  decease  and  if  in  poverty  to  have  them 
freely." 

"  Fynes  to  be  departed  in  two,  the  one  halff 
thereof?  towarde  the  fyndyng  of  a  light  by  for  the 
image  of  our  lady  of  Pyte  within  the  trinitie 
church  of  Hull  and  the  other  halff  to  the  comyn 
wele  of  the  sayd  town." 

It  may  be  seen  from  these  and  many  other 
regulations  that  the  craft  gilds  were  monopolists 
in  intention,  if  not  in  fact.  To  a  large  extent  they 
exercised  a  control  over  the  prices  of  commodi- 
ties, the  quality  of  wares  and  the  wages  of  ser- 
vants. The  number  of  persons  allowed  to  enter 
a  given  trade  was  restricted  as  far  as  possible. 
Competition  was  prevented  and  thereby  monop- 
oly profits  were  secured.  At  the  same  time  there 
were  many  beneficial  regulations  such  as  those 
concerning  the  quality  of  work,  which  secured  to 
the  consumer  a  good  article  if  not  always  a  fair 
price.  Also  in  many  cases  gild  membership  was 
open   to    any  who   had   completed   the    required 


GTLDS!  A!^  MONOPOLIES.  51 

years  of  apprenticeship  and  who  paid  the  neces- 
sary fees.  Competition  among  the  members  of 
the  same  craft  must  have  prevented  the  existence 
of  any  very  strict  monojDoly  and  prices  could  not 
have  been  much  higher  than  free  competition 
would  have  secured. 

As  time  went  on  and  the  towns  increased  in 
population  the  gilds  found  it  more  and  more  diffi- 
cult to  maintain  their  privileges  and  to  enforce 
their  rules.  The  rules  grew  more  severe  as  they 
became  more  ineffective. 

The  people  frequently  complained.  Outsid- 
ers demanded  admission.  As  early  as  the  year 
1321  the  weaver's  monopoly  was  a  grievance  in 
London.  In  the  year  1437  it  was  stated  that  the 
gilds  set  the  local  authorities  at  defiance  and 
worked  injury  to  the  people.  The  preamble  to 
an  act  in  redress  of  these  grievances  declares  that 
"  masters,  wardens,  and  people  of  gilds,  fraterni- 
ties and  other  companies  corporate,  dwelling  in 
divers  parts  of  the  realm,  oftentimes  by  color  of 
rule  and  governance  and  other  terms  in  general 
words  to  them  granted  and  confirmed  by  char- 
ters and  letters  patent  of  divers  Kings,  made 
among  themselves  many  unlawful  and  unreason- 
able ordinances  as  well  in  prices  of  ware  and 
other  things  for  their  own  singular  profit  and  to 
the  common  hurt  and  damage  of  the  people."  The 
act   required   that   gild  ordinances  be   in   future 


52     MONOPOLIES   PAST   AND    PRESENT. 

submitted  to  justices  of  the  peace  and  recorded 
by  them. 

In  the  end  it  became  impossible  for  the  gilds 
to  prevent  craftsmen,  not  gild  brethren,  from  sell- 
ing their  goods  and  plying  their  trades.  The  eco- 
nomic power  of  the  gilds  disappeared.  Prices 
came  to  be  regulated  by  competition  and  the  gilds 
contented  themselves  with  retaining  control  of 
the  town  government.  This  final  monopoly  did 
not  pass  away  until  the  nineteenth  century  and  a 
few  relics  of  it  still  remain.  Craft  gilds  still  ex- 
ist in  Asia  and  in  the  less  civilized  countries  of 
Europe,  where  they  still  maintain  their  exclusive 
spirit  and  exercise  the  powers  of  monopoly  to  the 
extent  of  their  ability. 

As  handiwork  in  the  Middle  Ages  was  regu- 
lated by  the  craft  gilds,  so  buying  and  selling  was 
largely  in  the  control  of  the  merchant  gilds.  As 
early  as  the  year  1087  w^e  find  mention  of  a  mer- 
chant gild  or  hanse  established  in  the  town  of 
Burford  in  England  by  a  charter  granted  by  the 
lord  of  the  manor. 

From  that  time  on  merchant  gilds  were  closely 
connected  with  the  government  of  the  towns  in 
which  they  were.  In  many  cases  the  officers  of 
the  gild  merchant  were  also  the  chief  officials  of 
the  municipality.  The  craftsmen  were  considered 
inferior  to  the  merchants  and  were  not  at  first 
admitted  to   a  share  in  the  government.     Mer- 


GILDS  AS  MONOPOLIES.  53 

chant  gilds  were  organized  in  all  the  principal 
English  towns  as  these  towns  obtained  charters 
of  freedom  from  king  or  baron.  The  charter  of 
Newcastle-under-Lyne,  granted  by  Henry  II  reads 
as  follows:  "  That  our  town  of  Newcastle-under- 
Lyne  be  a  free  borough,  and  that  the  burgesses 
of  that  borough  have  Gilda  Mercatoria  in  the  said 
borough,  with  all  the  liberties  and  free  customs 
to  such  Guild  Merchant  in  any  way  belonging, 
and  that  they  may  pass  through  all  our  dominions 
with  their  merchandise,  buying  and  selling  and 
traificking  well  and  in  peace,  freely,  justly  and 
honorably." 

The  only  merchant  gild  still  surviving  in  Eng- 
land is  that  of  Preston,  whose  charter  was  granted 
by  Henry  II  toward  the  end  of  the  twelfth  cen- 
tury. Among  the  "  Liberties  of  Preston "  may 
be  mentioned  the  following, — 

"That  they  shall  have  Gild  Mercatory  with 
Hanse  and  other  customs  and  liberties  belonging 
to  such  Gild,  so  that  no  one  w^ho  is  not  of  that 
Gild  shall  make  any  merchandise  in  the  said  town 
unless  with  the  will  of  the  burgesses." 

"  If  any  nativus  dwell  anywhere  in  the  same 
town  and  hold  any  land,  and  be  in  the  f  orenamed 
Gild  and  Hanse  and  pay  lot  and  scot  wdth  the 
same  burgesses  for  a  year  and  a  day,  then  he 
shall  not  be  reclaimed  of  his  lord,  but  shall  re- 
main free  in  the  same  town," 


54      MONOPOLIES    PAS7'    AND    PRESENT. 

"  If  anyone  wish  to  be  made  a  burgess  lie  shall 
come  into  court  and  give  to  the  Reeve  twelve 
pence  and  shall  take  his  burgage  from  the 
Pretors." 

"  No  one  can  be  a  burgess  unless  he  have  a 
burgage  of  twelve  feet  in  front." 

"  A  stranger  may  not  participate  in  any  mer- 
chandise with  the  burgesses  of  the  town." 

"  If  a  burgess  shall  sell  for  more  than  the  assise 
he  shall  be  in  mercy  twelve  pence." 

"  If  a  burgess  marry  his  daughter  or  grand- 
daughter to  anyone,  he  may  marry  her  without 
the  license  of  anyone." 

"  It  is  the  custom  of  the  borough  that  no  bur- 
gess ought  to  be  taken  for  an  accusation  by  the 
lord  or  by  the  Eeeve  if  he  have  sufficient 
pledges." 

"  If  a  burgess  wound  another  and  they  be  will- 
ing to  agree  amicably,  friends  appointed  between 
them  may  require  for  every  hidden  cut  the 
breadth  of  a  thumb,  four  pence,  and  for  every 
open  and  visible  wound  eight  pence,  and  whoever 
is  wounded  may  prove  what  he  has  lost  by  the 
wound  and  the  other  shall  pay  him." 

The  regulations  of  other  merchant  gilds  were 
similar  to  these.  They  were  monopolistic  in 
spirit  but  the  tendency  to  monopoly  was  modified 
to  a  considerable  extent  by  various  circumstances. 
The  admission  fee  was  often  fairly  low  and  there- 


GILDS  AS  iWXOPOLTES.  55 

fore  the  gilds  merchant  were  not,  strictly  speak- 
ing, exclusive  corporations.  There  must  have 
been  more  or  less  competition  between  burgesses 
or  gild  members.  Merchants  from  other  cities  at 
times  had  privileges  of  trade  throughout  the  King- 
dom. There  «vere  frequent  fairs,  to  which  came 
merchants  from  abroad  as  well  as  from  other  Eng- 
lish cities.  There  were  national  and  municipal 
laws  against  forestalling  and  engrossing,  which 
to  some  extent  prevented  excessive  profits  and  the 
assizes  of  bread,  wine,  ale  and  the  like  had  the 
same  effect. 

As  trade  was  regulated  and  controlled  within 
the  to^\Tis  by  the  merchant  gilds,  so  the  foreign 
trade  of  England  was  largely  in  the  hands  of  the 
Merchants  of  the  Staple.  It  was  thought  best 
by  the  Kings  of  England  not  to  allow  English 
goods  to  be  exported  freely  but  to  divert  the 
trade  to  one  or  more  ports  called  staple  towns. 
Only  at  a  staple  town  (stahile  emporium)  could 
English  goods,  such  as  wool  and  leather,  be  sold 
to  foreign  merchants.  At  first  the  English  staple 
was  fixed  at  some  foreign  town,  as  Bruges  or  Ant- 
werp. Afterward  certain  English  to^vns  were 
designated  as  staple  towns  and  foreign  merchants 
were  invited  to  come  to  England  to  buy.  Again 
the  staple  was  fixed  at  Calais  and  again  at  Bruges. 
At  a  staple  town  the  trade  was  regulated  by  the 
Mayor  and  Aldermen  of  the  Staple.     The  mayors 


56     MONOPOLIES   PAST   AND    PRESENT. 

were  at  first  nominated  by  the  King,  but  after- 
ward by  the  Merchants  of  the  Staple. 

The  organization  of  the  Staple  was  due  chiefly 
to  two  reasons,  first  to  the  desire  of  the  King  to 
simplify  the  collection  of  his  revenues  and  sec- 
ondly to  the  need  on  the  part  of  the  English  mer- 
chants ^or  mutual  protection  and  aid  while  trad- 
ing in  foreign  lands.  Xo  doubt  the  Merchants  of 
the  Staple  had  special  advantages  and  privileges 
not  granted  to  other  merchants  and  the  staple 
towns  certainly  enjoyed  a  monopoly  of  English 
export  trade.  The  institution  of  the  Staple  arose 
about  the  middle  of  the  thirteenth  century  and  did 
not  finally  die  out  until  the  eighteenth  century. 

Similar  to  the  English  Staple  was  the  German 
Hanse,  at  first  an  association  or  gild  of  German 
merchants  trading  in  London,  but  afterward  a 
great  league  embracing  at  one  time  as  many  as 
eighty-five  principal  German  cities,  carrying  on 
an  immense  and  highly  profitable  trade  with  Eng- 
land, Scandinavia,  Russia  and  other  countries. 
Like  the  Merchants  of  the  Staple  the  German 
Hansards  united  with  one  another  for  mutual 
protection  and  for  the  securing  of  trading  privi- 
leges in  England  and  other  countries.  Merchants 
not  belonging  to  the  Hanse  did  not  enjoy  these 
privileges  and  had  little  or  nothing  to  do  with 
German  export  and  import  trade. 

The  origin  of  the  German  Hanse  is  very  ob- 


GILDS  AS  MONOPOLIES.  57 

scure.  In  Anglo-Saxon  times  the  "  Men  of  the 
Emperor  "  were  established  in  London  and  were 
granted  special  trading  privileges.  In  the  reign  of 
Henry  II  the  German  Hanse  seems  to  have  been 
composed  largely  of  merchants  of  Cologne  who 
had  a  hanse-house,  the  Steelyard,  in  London  and 
enjoyed  special  privileges,  including  the  royal 
protection  and  exemption  from  exactions  levied 
on  other  traders.  Trade  in  those  days  was  always 
preferential.  Merchants  who  did  not  obtain  con- 
cessions could  not  compete  on  equal  terms  with 
the  favored  merchants.  German  merchants  wish- 
ing to  trade  with  England  were  therefore  obliged 
to  join  the  Hanse,  which  presently  included  mer- 
chants from  other  German  towns,  as  Bremen  and 
Hamburg.  In  the  thirteenth  century  the  town  of 
Liibeck  was  admitted  to  the  league  and  soon  occu- 
pied the  position  of  leadership  which  formerly 
belonged  to  Cologne.  Under  the  leadership  of 
Liibeck  the  Hanseatic  League  became  a  most  pow- 
erful confederacy,  dominating  the  trade  of  the 
Baltic  and  the  North  Sea  and  indeed  of  nearly  the 
whole  of  Europe  north  of  Italy. 

The  mercantile  policy  of  the  League  was  regu- 
lated by  a  general  assembly  w^iich  met  once  a 
year,  usually  at  Liibeck.  There  was  a  close  con- 
nection between  the  League  and  the  merchant 
gilds  which  controlled  the  government  of  the  va- 
rious towns,  so  that  what  was  at  first  merely  an 


68  MONOPOLIES    PAST   AND    PRESENT. 

association  of  merchants  became  a  league  of  cities 
bound  together  by  what  was  practically  an  offen- 
sive and  defensive  alliance.  To  maintain  their 
privileges  and  monopolies  they  frequently  carried 
on  war,  especially  with  Denmark,  and  they  even  in- 
terfered in  England  during  the  Wars  of  the  lioses. 
They  had  several  great  centres  of  trade,  where 
they  established  hanse-houses  and  trading  colonies. 
The  chief  of  those  were  London  in  England, 
Bruges  in  Flanders,  Bergen  in  Norway,  Wisby  in 
Sweden  and  Novgorod  in  Russia.  The  power  of 
the  League  attained  its  highest  point  about  the 
time  of  the  Treaty  of  Stralsund  in  the  year  1370 
after  a  successful  war  with  Denmark.  During  the 
greater  part  of  the  fourteenth  century  it  main- 
tained its  po^ver  and  privileges  but  toward  the 
end  of  that  century  its  greatness  began  to  pass 
away. 

Several  causes  contributed  to  the  decline  of  the 
League.  The  minor  cities  of  the  League  were 
jealous  of  the  supremacy  and  selfishness  of 
Liibeck.  AVithin  the  towns  there  were  internal 
disturbances  due  to  conflicts  between  the  mer- 
chant and  craft  gilds.  The  German  princes  were 
increasing  their  power  at  the  expense  of  the  free 
cities.  The  Scandinavian  countries  objected  to 
the  commercial  tyranny  of  the  Hanse  towns  and 
made  war  on  them.  The  discovery  of  America 
and  the  finding  of  the  Cape  route  to  India  diverted 


mLDFI  AS  MONOPOLIES.  59 

trade  from  the  customary  channels.  The  discovery 
of  the  ocean  route  to  the  White  Sea  in  1554  by 
Richard  Chancellor  introduced  English  competi- 
tion in  Russia  and  caused  the  decline  of  the  Han- 
seatic  trade  with  Novgorod.  English  merchants, 
especially  the  Company  of  Merchant  Adventurers, 
encroached  upon  the  German  trade  in  the  North 
Sea  and  broke  down  the  Hanseatic  monopoly  in 
the  Baltic  Sea.  This  movement  was  aided  by 
Queen  Elizabeth,  who  sent  an  armed  expedition 
against  the  Hansards  and  also  deprived  the  Hanse 
merchants  of  their  special  privileges  in  London. 
To  crown  their  misfortunes,  the  herring  began  to 
leave  the  Baltic  Sea  and  went  to  the  coast  of  Hol- 
land. Because  of  these  and  other  causes,  the 
League  gradually  declined  until  it  was  finally 
ruined  by  the  terrible  Thirty  Years'  War  (1618- 
1648). 

The  great  rival  of  the  Hanseatic  League  in  the 
sixteenth  and  seventeenth  centuries  was  the  Com- 
pany of  Merchant  Adventurers,  which  had  received 
a  charter  of  privileges  in  the  year  140i7  as  the 
Brotherhood  of  St.  Thomas  Becket.  This  com- 
pany, like  the  Merchants  of  the  Staple,  was  an  off- 
shoot of  the  Mercers'  Company,  whose  patron 
saint  was  Thomas  of  Canterbury.  It  marks  the 
transition  between  the  mediaeval  gilds  and  the 
later  trading  companies  like  the  British  East  India 
Company.  It  was  primarily  a  London  company, 
but  had  branches  at  Exeter  and  Newcastle. 


60  MONOPOLIES    PAST   AND    PRESENT. 

At  first  anyone  might  become  a  member  by  pay- 
ing the  "  haunce  "  or  "  freedom  fine  "  of  six  shill- 
ing and  eight  pence,  but  soon  the  fine  was  raised 
to  one  hundred  shillings  and  then  to  forty  pounds, 
which  produced  in  1497  a  great  outcry  among 
merchants  in  other  parts  of  England.  The  fine 
was  therefore  reduced  to  less  than  seven  pounds, 
still  a  great  sum  in  those  days.  In  the  year  1505 
Henry  VII  granted  the  company  a  charter  under 
the  name  of  the  Fellowship  of  the  Merchant  Ad- 
venturers of  England,  with  further  exclusive  privi- 
leges, and  their  commercial  position  and  influence 
soon  became  very  great.  At  the  beginning  of  the 
sixteenth  century  the  company  had  over  four  thou- 
sand members.  It  is  stated  that  in  1550  they  em- 
ployed twenty  thousand  persons  in  Antwerp  alone. 

The  company  is  thus  described  in  its  own  rec- 
ords of  1601:  "  The  company  consists  of  a  great 
number  of  wealthy  merchants  of  divers  great 
cities  and  maritime  towns  in  England, —  London, 
York,  Nonvich,  Exeter,  Ipswich,  Newcastle,  Hull, 
etc.  These  of  old  times  linked  themselves  to- 
gether for  the  exercise  of  merchandise  by  trading 
in  cloth,  kersies,  etc.,  whereby  they  brought  great 
wealth  to  their  respective  places  of  residence. 
Their  limits  are  the  towns  and  ports  lying  between, 
the  river  Somme  and  all  the  coasts  of  ISTetherland 
and  Germany  within  the  German  Sea:  not  unto 
all  at  each  man's  pleasure,  but  unto  one  or  two 
towns  at  most  within  the  said  bounds,  which  they 


0ILD8  AS  MONOPOLIES.  61 

commonly  call  Mart  towns  or  Towns,  because 
there  only  they  stapled  their  commodities  and  put 
them  to  sale  and  thence  only  they  brought  such 
foreign  wares  as  England  wanted  and  which  were 
brought  from  far  by  divers  nations  flocking 
thither  to  buy  and  sell  as  at  a  fair."  The  regula- 
tions of  the  Merchant  Adventurers  were  similar 
to  those  of  the  Gilds  and  the  Merchants  of  the 
Staple.  In  the  words  of  Cunningham,  "  No  one 
might  trade  at  odd  times  or  in  secret  places,  but 
fairly  and  openly;  a  minimum  price  was  fixed  and 
no  one  was  to  spoil  the  market  by  taking  less; 
thus  one  man  did  not  try  to  undersell  others. 
Similarly  the  "  stint  "  was  intended  to  prevent 
any  one  dealer  from  engrossing  the  whole  trade. 
The  adventurers  contended  that  these  regulations 
benefited  merchants,  as  they  insured  a  steady 
trade  with  no  violent  fluctuations  and  thus  their 
rules  really  conduced  to  the  public  weal,  while 
they  denied  that  there  was  any  monopoly,  as  the 
merchants  competed  w^ith  one  another  within  the 
prescribed  limits,  and  the  whole  body  was  subject 
to  competition  wath  the  Hanse  and  other  alien 
merchants." 

It  is  evident,  how^ever,  that  the  profits  of  the 
Merchant  Adventurers  were  above  the  level  that 
would  have  been  secured  by  free  competition,  for 
it  was  profitable  for  independent  merchants,  called 
"  interlopers,"  to  run  the  risk  of  intrenching  upon 
their  trade.     Their  rules  and  agreements,   also, 


62     MONOPOLIES   PAST   AND    PRESENT. 

must  have  operated  to  some  extent  in  restraint  of 
trade.  ^Notwithstanding  the  protests  of  outsiders 
and  of  rival  companies,  the  Merchant  Adventurers 
continued  to  enjoy  their  special  privileges  until 
well  into  the  eighteenth  century. 

The  Company  of  Merchant  Adventurers  was 
not  the  only  association  of  English  Merchants  pos- 
sessing special  privileges  in  foreign  trade.  In  the 
year  1581  Elizabeth  granted  to  the  Levant  Com- 
pany also  called  the  Turkey  Company  the  exclu- 
sive right  of  trading  with  Turkey.  In  the  year 
1605  the  company  received  a  charter,  confirming 
and  extending  its  privileges.  Any  English  subject 
could  become  a  member  of  the  company  on  pay- 
ment of  an  admission  fee  of  twenty-five  pounds. 
Adam  Smith  called  it  "  a  strict  and  oppressive 
monopoly."  Its  charter  was  surrendered  in  the 
year  1825.  The  Eastland  Company,  chartered  by 
Elizabeth,  enjoyed  exclusive  rights  of  trade  in  the 
Baltic  Sea.  Its  admission  fee  was  at  first  very 
high  but  in  1672  it  was  reduced  to  forty  shillings. 
The  Muscovy  Company,  afterward  called  the 
Russian  Company,  was  originally  a  joint-stock 
company,  founded  by  Sebastian  Cabot  in  1553  and 
chartered  in  1555.  Later  it  became  a  regulated 
company,  open  to  all  who  could  pay  the  admission 
fine  but  the  fine  was  so  high  as  to  make  it  practi- 
cally exclusive.  The  company  opened  up  a  great 
trade  with  Russia  by  way  of  Archangel.  Still  an- 
other company  was  the  Society  of  the  Merchant 


OILDS  A.Sf  MONOPOLIES.  63 

Adventurers  of  Exeter,  incorporated  by  Eliza- 
beth. 

These  and  a  few  other  regulated  companies  con- 
trolled for  a  long  time  the  entire  foreign  trade  of 
England.  They  mark  the  transition  between  the 
mediaeval  gilds  and  the  later  joint-stock  com- 
panies. Because  of  the  high  admission  fee  they 
were  open  only  to  the  richer  merchants,  who  were 
constantly  at  war  with  outsiders  or  interlopers. 

The  merchants  traded  independently  with  their 
own  capital  but  competition  was  restricted  by 
various  regulations.  They  enjoyed  monopoly 
powers  only  in  so  far  as  they  were  able  to  main- 
tain a  level  of  prices  higher  in  selling  and  lower 
in  buying  than  would  have  existed  under  free  com- 
petition. This  control  of  prices  must  have  been 
largely  prevented  by  competition  among  the  privi- 
leged merchants  themselves,  by  the  competition  of 
foreign  merchants,  of  English  interlopers  and  of 
merchants  who  enjoyed  special  dispensations 
granted  by  the  King.  These  special  dispensations 
were  frequently  granted  either  to  ro3'al  favorites 
or  to  persons  who  paid  well  for  the  privilege.  In 
the  year  1449  one  John  Taverner  of  Hull  received 
a  special  license  to  trade  with  Italy  and  is  said  to 
have  acquired  a  great  fortune  thereby. 

In  those  days  it  was  not  thought  wise  to  allow 
freedom  of  trade.  Even  so  great  a  man  as  Francis 
Bacon  said:     "  I  dare  not  advise  to  adventure  the 


64  MONOPOLIES   PAST   AND    PRESENT. 

great  trade  of  the  Kingdom,  which  hath  been  so 
long  under  government  in  a  free  and  loose  trade." 
The  evils  of  competition  were  well  understood. 
Its  advantages  were  not  so  clearly  perceived.  The 
benefits  of  system  and  organization  in  trade  and 
commerce  were  fully  appreciated.  The  unfair- 
ness and  damage  produced  by  privilege,  discrimina- 
tion, favor  and  monopoly  were  largely  overlooked. 
There  was  much  conflict  of  interests  within  and 
without  the  gilds  and  regulated  companies.  The 
interests  of  masters,  journeymen  and  apprentices 
were  not  always  harmonious.  There  were  con- 
flicts between  the  various  gilds  and  the  great  regu- 
lated companies  did  not  enjoy  perpetual  peace. 
Interlopers  were  troublesome  and  outsiders  clam- 
orous. Cities  grew  in  population.  Commerce  ex- 
panded. The  people  demanded  the  abolition  of 
privilege.  In  time  the  demand  was  granted.  The 
industrial  revolution  destroyed  the  mediaeval  or- 
ganization of  industry  and  established  the  system 
of  industrial  liberty.  Some  have  called  it  indus- 
trial anarchy,  because  of  its  lack  of  organization, 
its  absence  of  system.  But  anarchy  is  impossible. 
A  new  organization  has  arisen  in  the  place  of  the 
old.  The  nineteenth  century  has  produced  trade- 
unions  and  trusts,  and  industrial  freedom  is 
limited  in  a  new  way.  It  remains  for  the  twen- 
tieth century  to  bring  forth  a  system  of  legisla- 
tion suitable  to  the  new  conditions,  capable  of  con- 
trolling the  new  forces. 


IV. 
EXCLUSIVE  TRADING  COMPANIES. 
5 


W.  Cunningham.  "  The  Growth  of  English  Industry  and 
Commerce,"  Vol.  II,  Cambridge,  1892. 

H.  DE  B.  GiBBiNS,  "  Industry  in  England,"  New  York,  1897. 

Henry  Stevens,  "  The  Dawn  of  British  Trade  to  the  East 
Indies,"  London,  1S8G. 

W.  S.  Lindsay,  "  History  of  Merchant  Shipping  and 
Ancient  Commerce,"  Vol.  II,  London,   1874. 

E.  R.  Fox  Bourne,  "  The  Romance  of  Trade." 

J  Macdonald  Oxley,  "  The  Romance  of  Commerce,"  New 
York,  1897. 

Beckles  Wilson,  "  The  Great  Company,"  London,  1899. 

George  Bry'CE,  "  The  Remarkable  History  of  the  Hudson's 
Bay  Company,"  London,  1900. 

Articles  in  the  "  Encyclopcedia  Britannica  "  and  other  en- 
cyclopaedias. 


CILIPTER  lY. 

EXCLUSIVE    TRADING    COMPANIES. 

The  discoveries  of  Columbus,  Da  Gama  and 
other  explorers  of  their  day  opened  up  great  and 
profitable  fields  for  the  commerce  of  the  world. 
The  commercial  nations  of  that  time,  notably  Por- 
tugal, Holland  and  England,  were  not  slow  to 
push  out  along  the  new  lines  and  with  new 
methods.  The  privileges  of  such  regulated  com- 
panies as  the  Merchant  Adventurers  did  not  ex- 
tend to  the  new  fields  for  enterprise.  The  way 
was  therefore  open  for  the  organization  of  joint- 
stock  companies,  trading  \Wth  combined  capital 
and  possessing  true  monopoly  privileges. 

There  were  at  that  time  valid  reasons  to  justify 
the  existence  of  strong  companies  trading  in  new 
and  undeveloped  fields.  The  same  reasons  were 
held  to  justify  grants  of  monopoly  to  these  com- 
panies. For  the  successful  prosecution  of  great 
and  hazardous  enterprises,  capital  was  required 
greater  than  any  one  merchant  would  be  able  or 
willing  to  adventure.  There  were  great  risks. 
The  navigation  of  unknown  seas  was  perilous  in 
the  extreme  but  more  perilous  tluin  uncharted 
coasts,  coral  reefs,  typhoons,  fogs  and  icebergs, 
were  the  pirates  that  infested  the  seas  and  the 

67 


68     MONOPOLIES  PAST  AND   PRESENT. 

savages  that  lay  in  wait  on  shore.  Hardly  less  to 
be  dreaded  than  savage  pirates  were  the  rival 
traders  who  were  ready  to  seize  the  enemies'  goods 
and  to  sell  their  persons  into  slavery. 

The  risks  were  great  but  the  profits  were  also 
great,  if  only  they  could  be  secured  to  the  ad- 
venturers against  interlopers  and  foreigners.  In 
those  days  trade  followed  the  flag  and  the  flag 
followed  trade.  Where  the  explorer  and  trader 
established  his  factory  there  he  planted  the  flag 
of  his  fatherland  and  made  the  beginnings  of 
colonial  empire.  He  considered  that  he  was  doing 
a  ser"\dce  to  his  country  and  he  demanded  to  be 
paid  for  that  service.  In  consideration  of  exclu- 
sive privileges  of  trade  for  a  longer  or  shorter 
time  he  would  gladly  adventure  his  fortune  and 
his  life.  Without  such  inducement  no  man  could 
be  expected  to  take  so  great  a  risk. 

A  typical  monopoly  was  granted  by  Henry  VII 
to  John  Cabot  and  his  three  sons  in  the  year  1496. 
Cabot  was  empowered  by  royal  license  to  fit  out 
five  ships  at  his  own  expense  for  the  discovery  of 
lands  "  which  have  hitherto  been  unknown  to  all 
Christians."  There  he  was  to  plant  the  English 
flag  and  to  enjoy  a  monopoly  of  trade  but  one 
fifth  of  his  capital  gain  was  to  go  to  the  king. 
Cabot  was  able  to  fit  out  only  one  ship  and  al- 
though he  discovered  the  continent  of  America  in 
1497  his  trading  monopoly  was  never  established. 


EXCLUSIVE  TRADING  COMPAMES.  69 

The  voyage  of  Sebastian  Cabot  in  the  following 
year  was  equally  unprofitable. 

One  of  the  earliest  joint-stock  companies  was 
the  Muscovy  Company,  founded  in  the  reign  of 
Edward  VI  by  some  London  merchants  at  the 
instance  of  Sebastian  Cabot  for  the  purpose  of 
discovering  a  northeast  passage  to  India.  The 
capital  was  six  thousand  pounds  in  twenty-five 
pound  shares.  An  expedition  was  undertaken  in 
the  year  1553  under  Richard  Chancellor  and 
Hugh  TVilloughby.  "VYilloughby  perished  in  Lap- 
land but  Chancellor  in  the  following  year  entered 
the  White  Sea  and  discovered  a  harbor  at  the 
mouth  of  the  Dwina,  where  Archangel  was  after- 
ward founded.  In  1555  the  company  received  by 
charter  exclusive  privileges  of  trade  with  Russia 
by  the  northern  route.  They  also  received  special 
pri%dleges  from  the  Czar  of  Russia.  Through  the 
activity  of  the  explorer  Jenkinson  the  company's 
trade  was  extended  through  Russia  to  Persia  and 
thereby  to  the  Far  East.  The  company  also  ob- 
tained a  monopoly  of  the  whale  fishing  of  Spitz- 
bergen.  In  the  year  1GG9  the  Czar  admitted  the 
Dutch  to  an  equal  footing  with  the  company.  Af- 
ter this  it  ceased  to  be  a  joint-stock  company  and 
became  a  regulated  company  like  the  Merchant 
Adventurers.  Henceforth  each  merchant  traded 
with  his  own  capital  under  the  regulations  of  the 
company.  The  company  for  many  years  main- 
tained the  English  embassy  to  Russia. 


70  MONOPOLIES   PAST   AND    PRESENT. 

Another  important  joint-stock  company  was  the 
Royal  African  Company,  also  called  the  Guinea 
Company,  fonnded  by  a  royal  charter  in  1672,  the 
successor  of  four  previous  exclusive  companies.  It 
was  occupied  chiefly  in  procuring  gold  from 
Guinea  and  negro  slaves  for  the  British  planta- 
tions in  America.  The  company  had  no  parlia- 
mentary charter  and  therefore  could  not,  after 
the  Revolution  of  1688,  exclude  interlopers,  who 
took  advantage  of  the  open  trade  to  undersell  the 
company.  In  1698,  therefore.  Parliament  passed 
an  act  declaring  the  trade  open  but  giving  the 
company  the  right  to  levy  a  duty  of  ten  per  cent 
upon  private  traders  in  Africa,  The  Company  for 
various  reasons  did  not  prosper,  in  spite  of  aid 
from  the  British  government  and  in  the  year  1750 
it  was  changed  from  a  joint-stock  company  to  a 
regulated  company,  the  privileges  of  which  any 
British  subject  might  enjoy  upon  payment  of  an 
admission  fine  of  forty  shillings.  Even  then  the 
company  ^yas  not  a  great  success,  and  it  finally 
ceased  to  exist  in  the  year  1821.  Before  the 
American  Revolution  the  colonists  complained 
that  the  company  took  advantage  of  its  monopoly 
to  raise  the  price  of  negroes.  Among  the  "  Groans 
of  the  Plantations"  are  heard  the  following: 
"  Heretofore  we  might  send  to  Guiney  for  negroes 
when  we  Avanted  them,  and  they  stood  us  about 
seven  Pound  a  Head.     The  Account  is  short  and 


EXCLUSIVE  TRADING  COMPANIES.  71 

plain.  For  they  cost  about  the  value  of  forty 
shillings  a  Head  in  Guiney;  and  the  freight  was 
five  pound,  for  every  one  that  was  brought  alive 
and  could  go  over  the  ship  side.  But  now  we  are 
shut  out  of  this  Trade,  and  a  Company  is  put 
upon  us,  from  whom  we  must  have  our  negroes, 
and  no  other  way.  A  Company  of  London  Mer- 
chants have  got  a  Patent,  excluding  all  others,  to 
furnish  the  Plantations  with  negroes.  And  now 
we  buy  negroes  at  the  price  of  an  engrossed  com- 
modity: the  common  rate  of  a  good  negro  on  ship- 
board being  twenty  pound.  And  we  are  forced  to 
scramble  for  them  in  so  shameful  a  manner,  that 
one  of  the  great  Burdens  of  our  Lives  is  going  to 
buy  negroes.  But  we  must  have  them;  we  cannot 
be  without  them  and  the  best  men  in  those  coun- 
tries must  in  their  own  Persons  submit  to  the  In- 
dignity." 

Of  all  the  exclusive  companies  the  greatest  was 
the  British  East  India  Company,  founded  in  1599 
for  the  purpose  of  carrying  on  trade  with  the 
East  Indies.  The  East  India  trade  had  long  been 
of  great  importance  and  highly  profitable.  Be- 
fore the  epoch-making  voyage  of  Vasco  da  Gama 
in  1498  the  commerce  of  western  nations  with 
India  was  largely  in  the  hands  of  the  Arabs  and 
of  the  Italian  cities,  especially  Venice.  After  the 
discovery  of  the  Cape  route  to  India  the  monopoly 
of  the  Arabs  was  broken  down  and  the  Portuguese 


72  MONOPOLIES   PAST   AND    PRESENT. 

entered  upon  their  inheritance.  For  a  hundred 
years  the  trade  was  exclusively  controlled  by  Por- 
tugal and  the  Indian  Ocean  was  regarded  as  a 
Portuguese  sea,  upon  which  vessels  of  other 
European  nations  sailed  at  their  peril. 

The  Portuguese  trade  with  India  was  not 
under  the  control  of  a  single  company  but  all  Por- 
tuguese subjects  were  at  liberty  to  engage  in  it 
under  certain  restrictions.  The  merchants  were 
obliged  to  transport  their  goods  in  the  ships  of 
the  King  and  for  this  service  they  paid  thirty 
per  cent  of  their  value.  The  government  reserved 
a  monopoly  of  the  trade  in  pepper  and  also  re- 
served to  itself  the  trade  with  Japan,  China,  Ma- 
lacca, Mozambique,  and  Ormuz.  The  chief  ex- 
ports from  Portugal  to  India  were  woolen  goods, 
weapons,  lead,  hats,  dried  fruits,  salted  fish,  wine, 
oil  and  books.  The  chief  imports  consisted  of 
spices,  borax,  camphor,  sandal-wood,  ebony,  aloes, 
amber,  pearls,  precious  stones,  porcelain,  gold, 
silk,  carpets  and  cotton-goods.  The  trade  was 
exceedingly  profitable,  four  hundred  per  cent  be- 
ing a  common  rate  of  profit.  The  merchants  of 
other  European  nations  were  excluded  from  the 
direct  trade.  The  Portuguese  merchants  dis- 
dained to  carry  their  wares  to  foreign  markets. 
Lisbon  was  made  the  staple  mart  for  East  India 
wares  and  English,  German,  Dutch  and  French 
merchants  were  obliged  to  buy  in  Lisbon  at  Por- 
tuguese prices. 


EXCLUSilTE  TRADIXG  COMPANIES.  73 

Toward  the  end  of  the  sixteenth  century  the 
Portuguese  monopoly  was  invaded  by  the  Dutch, 
now  rising  to  the  position  of  pre-eminence  in  for- 
eign commerce  so  long  enjoyed  by  Spaniards  and 
Portuguese.  In  the  year  1596  Cornelius  Hout- 
man  doubled  the  Cape  and  sailed  to  Smnatra  and 
Bantam.  After  that  the  Dutch  continued  to  trade 
in  the  East  Indies  and  it  was  not  long  until  they 
had  expelled  the  Portuguese  from  almost  all  their 
possessions  and  reigned  supreme  in  the  Far  East 
with  colonies  at  the  Cape  of  Good  Hope,  on  the 
Red  Sea,  on  the  Persian  Gulf,  on  Ceylon,  Su- 
matra, Java,  the  Moluccas,  Formosa,  Malacca  and 
elsewhere.  The  Dutch  East  India  Company  was 
founded  in  1G02  and  obtained  a  monopoly  of  the 
East  Indian  trade,  especially  of  the  trade  of  spices. 
At  the  time  of  the  Treaty  of  Westphalia  in  1648, 
Holland  had  reached  the  highest  point  of  her 
maritime  supremacy.  Next  to  Spain  she  was  the 
greatest  colonial  power  in  the  world.  She  was 
supreme  in  the  East  Indies,  had  almost  a  monop- 
oly of  the  carrying  trade  of  Europe,  possessed 
great  fishing  interests  and  was  altogether  the 
greatest  commercial  nation  of  that  day.  Crom- 
well's Navigation  Act  of  1651  and  the  consequent 
war  between  Holland  and  England  was  a  great 
blow  to  the  commercial  supremacy  of  Holland. 

The  growth  of  English  commerce  in  the  East 
Indies  is  bound  up  with  the  history  of  the  British 


74  M0X0P0LIE8    rAST    AND    PRESENT. 

East  India  Company.  In  the  year  1599  the  Dutch 
had  raised  the  price  of  pepper  from  three  shillings 
to  six  and  eight  shillings  a  pound.  This  incident 
seems  to  have  called  the  attention  of  English  mer- 
chants to  the  extraordinary  profits  of  the  East 
Indian  trade.  However  that  may  be,  a  number 
of  London  merchants  in  that  year  formed  what 
was  practically  a  joint-stock  company  and  in  the 
following  year  obtained  a  charter  for  fifteen  years 
as  "  The  Governor  and  Company  of  Merchants 
of  'London  trading  to  the  East  Indies."  One 
hundred  and  twenty-five  shareholders  subscribed 
£70,000,  in  amounts  varying  from  one  hundred 
to  one  thousand  pounds  apiece.  x\t  first  any  mer- 
chant might  join  the  company  who  would  sub- 
scribe the  required  amount  but  after  a  time  the 
control  of  the  company  was  kept  in  the  hands  of 
the  earlier  subscribers,  although  the  capital  was 
increased  by  new  subscriptions  at  various  times. 
In  May,  1601,  the  first  expedition  set  out  from 
Torbay,  consisting  of  five  ships  with  cargoes  of 
merchandise  and  bullion.  That  the  merchants  of 
the  company  were  prepared  to  fight  as  well  as 
to  trade  is  indicated  in  the  inventory  of  the  Great 
Susan,  which  included  "  ten  sakers  with  their  car- 
riages, fourteen  demi-culverings,  eight  barrels  of 
powder,  one  barrel  of  matches,  thirty  muskets, 
eighteen  swords,  twenty-eight  short  pikes,  thir- 
teen long  pikes,  three  hundred  and  twenty  demi- 


EXCLUSIVE  TRADING  COMPANIES.  75 

culvering  round  shot  and  two  hundred  and  twenty 
saker  shot."  The  other  ships  were  similarly  pro- 
vided with  weapons  of  war.  A  more  peaceful  equip- 
ment was  also  carried  in  the  shape  of  presents 
^'  for  the  Princes  of  the  East  Indies  where  trade  is 
to  be  sought,"  consisting  of  "A  silver  fountaine 
and  basin  of  205  oz.,  2  Helmets,  2  Plumes  of 
fethers,  2  Looking-glasses  of  the  greatest,  1  stand' 
ing  cup  Avith  a  cover,  63  oz.,"  and  many  others. 
The  result  of  the  first  voyage  w^as  highly  encour- 
aging and  between  1603  and  1613  eight  other  voy- 
ages were  made.  The  profits  of  these  voyages, 
with  the  exception  of  that  of  1607,  varied  from 
one  hundred  to  two  hundred  per  cent  upon  the 
capital  employed.  The  company's  exclusive  rights 
were  granted  in  1609.  Its  limits  w^ere  vast,  ex- 
tending from  the  Cape  of  Good  Hope  eastward 
to  Cape  Horn.  The  first  factory  was  established 
at  Bantam  in  Java  in  1602  and  from  time  to  time 
factories  were  established  at  one  point  and  an- 
other. The  influence  of  the  company  was  ex- 
tended at  first  by  alliances  with  the  native  princes 
and  afterward  by  war  and  conquest. 

Almost  from  the  first  the  company  had  to  con- 
tend with  rivals  who  desired  to  share  in  the  profits 
of  the  new  trade  without  sharing  in  the  responsi- 
bilities connected  therewith.  Rival  companies 
were  formed  and  there  were  independent  traders 
or  interlopers  w'ho  were  willing  to  run  great  risks 


76  MOtJOPOLIE^    PAST   AND    PRESENT. 

for  the  sake  of  great  profits.  In  the  year  1635 
the  so-called  "  Courtiers'  Association "  received 
from  King  Charles,  who  accepted  a  share  in  the 
adventure,  a  license  to  trade  with  India,  in  spite 
of  the  remonstrances  of  the  older  company.  The 
two  companies  carried  on  a  mutually  injurious 
competition  for  some  years  but  in  1650  they 
united  and  monopoly  was  restored.  In  1655 
some  dissatisfied  shareholders  of  the  company  ob- 
tained a  charter  from  Cromwell  as  the  "  Com- 
pany of  Merchant  Adventurers  "  and  again  the 
East  Indian  trade  was  reduced  to  a  competitive 
basis.  The  markets  of  Europe  w^ere  glutted  with 
Indian  goods  and  the  traders  lost  money  but  after 
two  years  harmony  was  restored  by  a  second  con- 
solidation. 

In  1661  a  new  charter  was  granted  by  Charles 
II,  confirming  all  the  former  privileges  and  grant- 
ing the  company  permission  to  make  peace  or  war 
"  with  or  against  any  princes  or  people  not  being 
Christians  "  and  to  seize  all  unlicensed  persons 
and  send  them  to  England.  Under  this  charter 
interlopers  were  seized  and  under  pretext  of  pir- 
acy or  other  crimes  were  tried  by  the  company's 
tribunals  and  punished  with  much  severity. 

In  1682  another  attempt  was  made  to  establish 
a  rival  company,  but  it  failed  to  obtain  a  charter 
from  the  government.  As  a  result  the  East  India 
Company  ceased  to  publish  statements  showing 


EXCLVSITE  TRADING  COMPANIES.  77 

the  condition  of  its  business  and  the  rate  of  profit. 
The  effect  of  this  policy  was  the  opposite  of  that 
intended,  for  people  began  to  entertain  an  ex- 
aggerated opinion  of  the  profits  of  the  trade  and 
to  demand  still  more  urgently  that  it  be  throAvn 
open  to  free  competition.  After  the  Revolution 
the  independent  traders  claimed  that  the  com- 
pany's exclusive  privileges  had  been  abolished  by 
the  Declaration  of  Right  and  proceeded  to  engage 
in  an  unlicensed  trade  in  districts  that  had  been 
opened  through  the  energy  and  influence  of  the 
company.  The  success  of  these  individual  traders 
does  not  appear  to  have  been  very  great. 

In  the  year  1693  the  company  obtained  a  new 
charter  from  the  King,  granting  it  a  monopoly 
for  twenty-one  years  under  'certain  conditions. 
The  right  of  the  King  to  grant  such  a  charter  was 
questioned  in  the  House  of  Commons  and  it  was 
asserted  that  the  company  had  spent  large  sums 
of  money  in  bribing  certain  high  officials.  On 
investigation  it  was  found  that  ninety  thousand 
pounds  had  been  thus  improperly  expended.  It 
was  even  said  that  ten  thousand  pounds  had  been 
given  to  the  King.  The  House  passed  a  resolu- 
tion declaring  "  that  it  is  the  right  of  all  English- 
men to  trade  to  the  East  Indies  or  any  part  of  the 
world,  unless  prohibited  by  act  of  Parliament." 

After  this  time  the  interlopers  became  still  more 
energetic  in  their  competition  and  in  the  year  1698 


78  MONOPOLIES   PAST   AND    PRESENT. 

they  formed  themselves  under  act  of  Parliament 
into  a  regulated  company,  called  ''The  General 
Society  Trading  to  the  East  Indies."  The  new 
company  obtained  its  charter  by  advancing  to  the 
government  two  million  pounds  at  eight  per  cent. 
The  old  company  had  offered  to  lend  the  govern- 
ment seven  hundred  thousand  pounds  at  four  per 
cent,  but  the  government  preferred  the  larger  and 
more  expensive  loan  for  purposes  of  war.  In 
consideration  of  the  loan  the  old  company  was  to 
be  dissolved  and  the  members  of  the  new  com- 
pany were  to  have  the  monopoly  of  the  East  India 
trade  after  1701.  Not  to  be  outdone,  the  old 
company  subscribed  to  the  funds  of  the  General 
Company  and  in  1700  obtained  from  Parliament 
authority  to  trade  under  the  charter  of  that  com- 
pany. The  competition  that  resulted  was  injuri- 
ous to  both  companies  and  in  1702  Parliament 
provided  for  their  union,  allowing  seven  years 
for  the  completion  of  all  arrangements.  In  the 
year  1709  the  two  companies  were  finally  amal- 
gamated as  a  joint-stock  company,  "  The  United 
Company  of  Merchants  of  England  trading  to  the 
East  Indies."  Erom  both  Crown  and  Parliament 
the  consolidated  company  obtained  exclusive  priv- 
ileges of  trade  until  the  year  1726  to  all  places 
from  the  Cape  of  Good  Hope  eastward  to  the 
Straits  of  Magellan.  In  consideration  of  these 
benefits  the  company  made  a  loan  to  the  govern- 


EXCLUSIVE  TRADING  COMPANIES.  79 

ment  of  three  million,  one  hundred  and  ninety 
thousand  pounds  at  three  per  cent.  The  time  was 
afterward  extended  to  1733. 

Shortly  before  the  year  1733  the  British  public 
demanded  that  the  trade  should  be  made  free 
and  that  the  necessary  establishments  in  India 
should  be  maintained  at  the  expense  of  the  gov- 
ernment. It  was  only  by  making  further  loans 
to  the  government  and  by  paying  a  fine  of  two 
hundred  thousand  pounds  that  the  company  ob- 
tained a  renewal  of  its  privileges  until  1766.  In 
1744  the  company  obtained  a  further  renewal 
until  1780.  The  monopoly  of  the  company  be- 
came more  and  more  obnoxious  to  the  public  and 
in  1766  the  House  of  Commons  appointed  a  com- 
mittee of  inquiry  with  the  result  that  the  com- 
pany was  reconstructed  by  act  of  Parliament  in 
1773.  By  this  act  the  political  character  of  the 
company  was  recognized  and  provision  was  made 
for  parliamentary  control.  The  trade  to  India 
was  not  thrown  open  until  1813  and  the  company 
was  allowed  to  retain  the  monopoly  of  the  trade 
to  China  until  1833.  In  1833  the  company 
finally  ceased  to  be  a  commercial  institution.  Its 
dividends  were  thereafter  paid  out  of  taxes  on  the 
people  of  India  and  it  continued  to  exist  as  the 
agent  of  the  British  government  for  the  ruling 
of  India.  After  the  Indian  Mutiny  of  1857  the 
powers  of  the  company  were  taken  away  and  it 


80  MONOPOLIES   PAST   AND   PRESENT. 

continued  to  exist  merely  for  the  purpose  of  re- 
ceiving the  dividends  guaranteed  by  the  British 
government.  In  the  year  1873  Parliament  pro- 
vided for  the  payment  of  the  India  Stock  and  for 
the  final  extinction  of  John  Company. 

As  a  great  commercial  monopoly  the  company 
had  necessarily  many  enemies.  They  claimed  that 
the  monopoly  was  an  illegal  infringement  of  the 
rights  of  Englishmen.  They  asserted  that  the 
trade  was  injurious  to  England  in  that  it  drained 
the  country  of  its  gold  and  silver.  They  claimed 
that  the  company  charged  exorbitant  prices.  It 
was  also  asserted  that  low  prices  were  charged  for 
some  articles,  to  the  injury  of  the  English  pro- 
ducers of  these  commodities.  They  pointed  out 
the  fact  that  the  profits  of  the  company  were  often 
very  great.  They  tried  to  show  that  the  existence 
of  so  great  a  company  was  a  menace  to  the  pros- 
perity of  the  country,  for  if  the  company  should 
fail,  like  the  notorious  South  Sea  Company  and 
the  ill-fated  Darien  Company,  great  commercial 
disaster  would  be  the  inevitable  result.  They  ex- 
posed the  corruption  of  the  company's  officials  and 
their  bad  government  throughout  the  vast  territo- 
ries under  their  control.  The  outcry  against  War- 
ren Hastings  was  not  wholly  prompted  by  humani- 
tarian motives. 

On  the  other  hand  it  was  held  by  the  company 
and  its  friends  that  its  exclusive  privileges  were 


EXCLUSIVE  TR.inrXG  COMPAXIES.  81 

necessary  to  the  development  of  trade  in  the  East 
Indies.  Private  traders  could  never  hav^e  opened 
np  an  English  trade  in  the  face  of  Dutch  and 
French  opposition,  not  to  speak  of  dangers  from 
pirates  and  native  princes.  Private  traders  could 
not  have  obtained  concessions  from  the  native 
princes  nor  have  adequately  maintained  the  pres- 
tige of  English  trade.  The  great  establishment  of 
the  company  was  necessary  to  the  successful  pros- 
ecution of  trade  in  the  Far  East  and  such  an  estab- 
lishment private  traders  could  not  have  main- 
tained. Also  it  was  held  that  free  competition, 
whenever  tried,  had  proved  ruinous  to  the  trade. 
Finally  the  company  pointed  with  pride  to  the 
extension  of  British  dominion  in  the  Far  East  and 
rightly  claimed  to  have  founded  an  empire. 

For  a  long  time  the  balance  of  argument  was  on 
the  side  of  the  defenders  of  the  company,  but  as 
time  went  on  the  growth  of  trade  and  the  estab- 
lishment of  peace  rendered  its  existence  no  longer 
necessary. 

As  for  the  foreign  rivals  of  the  British  East 
India  Company,  they  were  to  a  great  extent  driven 
from  the  field.  As  the  Dutch  had  supplanted  the 
Portuguese,  so  they  in  time  were  supplanted  by 
the  British.  During  the  wars  of  the  French  Revo- 
lution practically  all  the  Dutch  colonies  from  the 
Cape  to  Java  were  taken  by  the  British.  France 
at  one  time  threatened  to  become  the  paramount 


82  MONOPOLIES   PAST   AND   PRESENT. 

power,  but  the  victories  of  Clive  put  an  end  to  her 
dream  of  empire  in  India,  as  the  victory  of  Wolfe 
at  Quebec  shattered  her  power  on  the  American 
continent. 

Another  interesting  company  is  the  Hudson's 
Bay  Company,  founded  in  1670  by  a  royal  charter 
granted  to  Prince  Rupert  and  seventeen  other 
noblemen  and  gentlemen  under  the  title  of  "  The 
Governor  and  Company  of  Adventurers  of  Eng- 
land trading  into  Hudson's  Bay."  This  charter 
generously  secured  to  the  company  "  the  sole  trade 
and  commerce  of  all  those  seas,  straits,  bays, 
rivers,  lakes,  creeks  and  sounds  in  whatever  lati- 
tude they  shall  be,  that  lie  within  the  entrance  of 
the  straits  commonly  called  Hudson's  Straits,  to- 
gether with  all  the  lands  and  territory  upon  the 
countries,  coasts  and  confines  of  the  seas,  bays, 
&c.,  aforesaid,  that  are  not  actually  possessed  or 
granted  to  any  of  our  subjects  or  possessed  by 
the  subjects  of  any  other  Christian  prince  or 
state."  The  grant  also  included  "the  whole  and 
entire  trade  and  trafiic  to  and  from  all  havens, 
bays,  creeks,  rivers,  lakes  and  seas  into  which  they 
shall  find  entrance  or  passage  by  w\^ter  or  land 
out  of  the  territories,  limits  or  places  aforesaid." 

Throughout  this  vast  region,  extending  in  the 
end  from  the  Atlantic  to  the  Pacific  and  from  the 
boundary  of  the  United  States  to  the  Arctic  Ocean, 
the  Hudson's  Bay  Company  possessed  for  nearly 


EXCLUSIVE  TRADING  COMPANIES.  83 

two  liundi/ed  years  a  practical  monopoly  of  the  fur 
trade,  the  lordship  of  the  land  and  the  powers  al- 
most of  a  sovereign  state.  Persons  intruding  vvere 
to  forfeit  nierehundise  and  ship,  one-half  to  the 
Crown  and  one-half  to  the  Company. 

Notwithstanding  its  opportunities,  the  company 
did  not  for  a  long  time  prosecute  the  trade  with 
any  great  vigor.  In  the  year  17-1:9  it  had  only 
four  forts,  occupied  hy  one  hundred  and  twenty 
men.  The  furs  taken  to  England  every  year 
amounted  in  value  to  only  twenty-eight  thousand 
pounds,  and  the  company  was  in  danger  of  losing 
its  charter  for  "  non-user."  The  annual  profit3 
at  this  time  amounted  to  about  eight  thousand 
pounds.  The  company  had  suffered  severely 
from  attacks  by  the  French  from  Canada,  who 
claimed  its  territory  as  part  of  New  France. 

After  1763  the  company  was  stirred  into 
greater  activity  by  the  encroachment  of  free 
traders  from  Canada.  In  1783  these  traders 
united  to  form  the  North  West  Fur  Company  of 
Montreal,  which  became  a  most  formidable  com- 
petitor of  the  Hudson's  Bay  Company.  For  a 
number  of  years  competition  was  extremely 
fierce,  to  the  common  ruin  of  fur-trade,  Indians 
and  white  men.  The  supply  of  furs  threatened 
to  be  exhausted,  because  of  indiscriminate  slaugh- 
ter, even  in  the  breeding  season,  of  both  male 
and  female  animals.     The  Indians  were  demoral- 


84  MONOPOLIES   PAST   AND    PRESENT. 

ized  hy  fire-water  and  the  white  men  by  savage 
competition,  which  at  times  broke  out  into  open 
war.  In  1821  the  rival  companies  amalgamated, 
obtaining  a  monopoly  of  trade  for  twenty-one 
years  throughout  a  great  part  of  the  territory 
granted  to  the  older  company.  In  1838  the  com- 
pany obtained  a  new  license  for  twenty-one  years. 
The  license  was  not  renewed  in  1859  and  since 
that  time  the  trade  has  been  free  to  all  but  the 
company's  fine  organization  has  enabled  it  to 
maintain  its  predominant  position  in  the  fur  trade 
of  northern  Canada.  In  1869  the  original  pos- 
sessions of  the  company  were  transferred  to  the 
British  government  and  in  1870  became  part  of 
the  Dominion  of  Canada.  In  return  the  company 
received  three  hundred  thousand  pounds,  retain- 
ing as  property  one-twentieth  of  the  original 
grant,  including  lands  of  considerable  value,  and 
fifty  thousand  acres  in  the  neigborhood  of  the 
trading  posts. 

It  is  maintained  by  the  friends  of  the  Hudson's 
Bay  Company  that  it  has  preserved  the  fur-bear- 
ing animals,  cared  for  the  Indians  and  opened  the 
great  ISTorth  West  to  settlers.  They  assert  that 
the  fur  trade  ought  not  to  be  open  to  competi- 
tion, unless  it  be  intended  to  destroy  it  utterly. 
There  is  much  to  be  said  for  this  view  and  it  is 
well  illustrated  by  the  case  of  the  Alaskan  Seal 
Fishery. 


EXCLUSIVE  TRADING  COMPANIES.  85 

The  enemies  of  the  company  have  stated  that 
the  Indians  have  received  ridiculously  low  prices 
for  their  furs  and  have  been  charged  absurdly 
high  prices  for  what  they  have  had  to  buy.  They 
say  that  the  Indians  have  not  b6en  greatly  bene- 
fited by  their  association  with  the  company's  ser- 
vants and  that  the  company  has  discouraged  set- 
tlement and  the  development  of  mining  resources 
in  the  North  West. 

During  the  seventeenth  and  eighteenth  cen- 
turies the  colonial  policy  of  the  leading  European 
nations  favored  the  establishment  of  exclusive 
companies,  organized  primarily  for  trade  and  sec- 
ondarily for  purposes  of  colonization.  Among 
the  more  celebrated  of  these  companies,  besides 
those  already  mentioned,  were  the  Brazil  Com- 
pany of  Lisbon;  the  Dutch  East  India  Company; 
the  Dutch  West  India  Company;  the  Company 
of  the  Hundred  Associates,  trading  in  New 
France;  the  French  West  India  Company;  the 
French  East  India  Company;  the  Louisiana  Com- 
pany, established  by  John  Law;  the  Virginia 
Companies  of  London  and  Plymouth,  devoting  es- 
pecial attention  to  colonization;  the  notorious 
South  Sea  Company;  the  short-lived  Darien  Com- 
pany. Such  companies  as  these,  with  the  pos- 
sible exception  of  the  Virginia  Companies,  were 
far  more  concerned  for  the  development  of  a 
profitable  trade  than  for  the  settlement  of  the 


86     MONOPOLIES   PAST   AND    PRESENT. 

regions  under  their  control.  Their  failure  in  this 
regard  is  now  clearly  perceived.  Their  success 
in  the  opening  up  of  new  fields  for  commerce  was 
often  considerable  and  later  traders  and  settlers 
enjoyed  the  fruits  of  their  labors. 


V. 
PATENTS  AND  COPYRIGHTS. 


J.  and  J.  H.  Johnson,  "  The  Patentee's  Manual,"  6th  Ed., 

London,  1890. 
G.  H.  Putnam,  "  The  Question  of  Copyright,"  New  York, 

1896. 
Hume,  "  History  of  England,"  Vol.  III. 
K   A.   Macfie,    "  Copyright  and   Patents   for   Inventions," 

Edinburgh,  1883.  " 
W.  Cunningham,  "  The  Growth  of  English  Industry  and 

Commerce,"  Cambridge,  1892. 
H.  DE  B.  GiBBiNS,  "  Industry  in  England,"  New  York,  1897. 
The  encyclopaedias. 


88 


CHAPTEK  V. 

PATENTS  AND  COPYRIGHTS. 

Letters  patent  or  open  letters  have  been  granted 
bj  English  sovereigns  from  very  early  times.  It 
was  considered  part  of  the  royal  prerogative  to 
issue  charters  or  letters  patent  sealed  with  the 
great  seal  and  addressed  to  the  King's  subjects  at 
large  and  securing  to  the  favored  person  grants  of 
land,  titles  of  nobility,  liberties,  franchises,  or  any- 
thing else  that  could  be  granted.  In  early  times 
towns  received  charters,  as  did  also  merchant  gilds, 
craft  gilds,  regulated  companies,  joint-stock  com- 
panies. It  was  also  not  uncommon  for  private 
individuals  to  be  favored  by  the  King  with  special 
privileges  and  immunities  secured  by  letters  pat- 
ent. Sometimes  they  were  granted  to  royal  favor- 
ites, sometimes  to  persons  who  paid  mone}'  into 
the  King's  treasury,  receiving  therefor  valuable 
franchises,  through  which  they  might  recoup 
themselves,  such  as  the  privilege  of  collecting  the 
taxes  or  the  exclusive  right  to  engage  in  certain 
manufactures  or  trades. 

Farming  of  the  revenue  was  more  common 
on  the  Continent  than  in  England  but  the  prac- 
tice of  granting  monopolies  in  restraint  of  trade 

flourished  in  England,  especially  under  the  Tudor 

89 


90  MONOPOLIES   PAST   AND    PRESENT. 

and  Stuart  sovereigns.  Many  such  monopolies 
were  granted  by  Henry  YIII  and  many  more  by 
Queen  Elizabeth.  The  manufacture  and  sale  of 
many  articles  of  common  use  came  to  be  monopo- 
lized by  a  few  persons,  while  the  people  suffered 
from  enhanced  prices.  Toward  the  end  of  the 
reign  of  Elizabeth  the  existence  of  monopolies 
became  a  great  public  grievance.  The  monopoly 
of  salt  was  said  to  have  raised  the  price  of  that 
common  necessary  from  six  pence  to  fourteen  or 
fifteen  shillings  a  bushel.  Sir  Edward  Darcy's 
patent  for  sealing  and  searching  leather  was  equiv- 
alent to  a  tax  of  thirty-three  per  cent  on  the  value 
of  the  leather  examined.  The  monopoly  of  salt- 
petre was  especially  obnoxious,  for  the  patentees 
had  not  only  the  exclusive  right  to  manufacture 
saltpetre  but  also  the  right  of  entering  every 
house  in  search  of  it,  to  the  great  annoyance  of 
householders,  who  were  often  obliged  to  pay  a 
sort  of  blackmail  to  secure  relief  from  the  nui- 
sance. 

At  last  the  grievances  became  so  great  that  the 
question  of  monopolies  was  taken  up  in  Parlia- 
ment in  the  year  1601  and  vigorous  speeches  were 
made  denouncing  the  monopolists  and  the  system 
that  permitted  their  existence.  A  list  was  read  of 
the  chief  commodities  manufactured  or  sold  under 
patents,  including  "  Currants,  salt,  iron,  powder, 
cards,  calf-skins,  fells,  pouldavies,  ox-shin-bones, 


PATENTS  AND  COPYRIGHTS.  91 

train-oil,  lists  of  cloth,  potashes,  aniseeds,  vinegar, 
sea-coals,  steel,  aqua-vitae,  brushes,  pots,  bottles, 
saltpetre,  lead,  accidences,  oil,  calamine-stone,  oil 
of  blubber,  glasses,  paper,  starch,  tin,  sulphur,  new 
drapery,  pilchards,  transportation  of  iron  ord- 
nance, of  beer,  of  horn,  of  leather;  importation  of 
Spanish  wool,  of  Irish  yarn."  When  this  list  was 
read  a  member  exclaimed,  "  Is  not  bread  among 
the  number?  Yes.  I  assure  you,  if  affairs  go  on 
at  this  rate,  we  shall  have  bread  reduced  to  a 
monopoly  before  next  Parliament."  Another 
member  spoke  of  "  Monstrous  and  unconscionable 
substitutes  to  the  monopolitans  of  starch,  tin,  fish, 
cloth,  oil,  vinegar,  salt  and  I  know  not  what,  nay 
what  not?  The  principallist  commodities  both  of 
my  town  and  country  are  engrossed  into  the  hands 
of  these  blood-suckers  of  the  commonwealth." 
Another  member  defined  a  monopoly  as  "  the  re- 
straint of  anything  public  in  a  city  to  a  private 
use,"  and  styled  the  monopolist  "  the  whirlpool  of 
the  prince's  profit." 

There  was  much  indignation  and  excitement  in 
the  Commons  and  a  bill  was  introduced  to  abolish 
all  the  monopolies.  The  bill  met  with  considerable 
opposition  from  the  court  party,  who  maintained 
that  the  matter  touched  the  royal  prerogative  and 
was  therefore  a  subject  for  petition  and  not  for 
legislation.  The  monopolies  were  also  defended 
as  in  many  cases  not  injurious  to  the  people  at 


92      MONOPOLIES    PAST   AND    PRESENT. 

large.  The  monopoly  of  gold  and  silver  thread 
was  defended  on  the  ground  that  it  prevented  the 
excessive  use  of  such  luxuries  as  gold  lace  and 
silver  lace  and  at  the  same  time  prevented  the 
melting  of  gold  and  silver  coin.  The  monopoly  of 
starch  was  said  to  prevent  the  waste  of  grain  and 
thereby  to  secure  low  prices  of  bread.  Sir  Walter 
Kaleigh  blushed  at  the  mention  of  his  monopoly 
of  playing  cards  but  it  was  claimed  to  be  in  the 
interests  of  good  morals  as  was  also  Raleigh's  pat- 
ent for  taverns.  Raleigh  also  defended  his  patent 
for  tin  on  the  ground  that  he  had  given  steady 
employment  to  the  miners  irrespective  of  varia- 
tions in  the  price  of  tin.  The  monopoly  of  salt- 
petre was  considered  necessary  in  order  to  main- 
tain an  adequate  supply  of  gunpowder  for  the 
Queen's  army  and  navy. 

These  and  other  feeble  excuses  did  not  appease 
the  anger  of  the  Commons.  Their  petition  to  the 
Queen  had  been  disregarded  and  the  bill  to  abolish 
monopolies  was  about  to  be  passed  when  the 
Queen  decided  to  yield.  She  sent  for  the  Speaker 
and  desired  him  to  inform  the  Commons  that  she 
would  immediately  abolish  the  most  oppressive 
of  the  monopolies.  The  Commons  received  the 
Queen's  gracious  message  with  glowing  expres- 
sions of  gratitude  and  they  showed  their  gratitude 
in  a  more  practical  manner  by  an  unusually  large 
grant  of  money.  Thereafter  the  patents  continued 
to  exist,  very  much  as  before. 


PATENTS  AND  COPYRTfiriTS.  93 

The  true  principle  upon  which  patents  could 
lawfully  be  granted  was  laid  down  in  the  year 
1602  by  Sir  Edward  Coke  in  the  case  of  Darcy  vs. 
Allein,  in  the  following  words,  "  That  by  the  an- 
cient common  law  the  King  could  grant  to  an  in- 
ventor or  to  the  importer  of  an  invention  from 
abroad,  a  temporary  monopoly  of  his  invention, 
but  that  grants  in  restraint  of  trade  were  illegal." 

The  first  Parliament  of  James  I  appointed  a 
committee  of  grievances  with  Coke  as  chairman 
to  petition  for  the  abolition  of  monopolies.  James 
therefore  at  that  time  annulled  the  patents  granted 
by  his  predecessors,  with  the  exception  of  the 
charters  of  the  exclusive  companies.  Even  thus 
illegal  monopolies  were  not  entirely  suppressed 
but  in  the  year  162-i  was  passed  the  Statute  of 
Monopolies,  which  forms  the  historical  basis  of 
the  present  law  of  patents  in  England  and  in  the 
United  States.  It  was  entitled  "  An  Act  concern- 
ing Monopolies  and  Dispensations  with  Penal 
Laws  and  Forfeiture  thereof."  By  this  law  "  All 
monopolies  and  all  commissions,  grants,  licenses, 
charters,  and  letters  patent  heretofore  made  and 
granted,  or  hereafter  to  be  made  and  granted  to 
any  person  or  persons,  bodies  politic  or  corporate 
whatsoever,  of  or  for  the  sole  buying,  selling, 
making,  working  or  using  of  anything  within  this 
realm  or  the  dominion  of  AYales:  or  of  any  other 
monopolies,  are  altogether  contrary  to  the  laws 


94  MONOPOLIES    PAST   AND    PRESENT. 

of  this  realm  and  so  are  and  shall  be  utterly  void 
and  of  none  effect  and  in  no  wise  to  be  put  into 
use  or  execution."  An  exception  was  made  in  the 
case  of  patents  for  new  industries  or  inventions, 
which  might  be  granted  for  twenty-one  years,  and 
patents  for  new  processes  for  fourteen  years. 
Also  the  act  did  not  touch  the  exclusive  com- 
panies engaged  in  foreign  trade. 

Charles  I  took  advantage  of  the  exception  in 
favor  of  new  inventions  and  sold  patents  in  a 
more  than  questionable  manner.  Patents  were 
multiplied.  The  King  obtained  an  increase  in 
revenue.  It  was  estimated  that  he  would  obtain 
twenty  thousand  pounds  sterling  from  soap  alone. 
Once  more  the  Commons  protested  in  a  most  vig- 
orous manner.  The  speech  of  Colepepper  in  the 
Long  Parliament  did  not  mince  matters.  He  said, 
"  I  have  but  one  grievance  more  to  offer  unto  you, 
but  this  one  compriseth  many;  it  is  a  nest  of  wasps 
or  a  swarm  of  vermin,  which  have  overcrept  the 
land.  I  mean  the  monopolisers  and  pollers  of  the 
people.  These,  like  the  frogs  of  Egypt,  have  got 
possession  of  our  dwellings,  and  we  have  scarce 
a  room  free  from  them;  they  sip  in  our  cup,  they 
dip  in  our  dish,  thev  sit  by  our  fire;  we  find  them 
in  the  dye-vat,  wash-bowl  and  powdering-tub ;  they 
share  with  the  butler  in  his  box,  they  have  marked 
and  sealed  us  from  head  to  foot,  Mr.  Speaker, 
they  will  not  bate  us  a  pin;  we  may  not  buy  our 


PATENTS  AND  COPYRIGnTH.  96 

own  clothes  without  their  brokage.  These  are 
the  leeches  that  have  sucked  the  commonwealth 
so  hard,  that  it  is  almost  become  hectical." 

After  this  time  we  hear  little  of  illegal  monopo- 
lies. After  the  Revolution  they  ceased  to  exist. 
The  present  law  of  patents  in  England  and  the 
United  States  and  other  civilized  countries  is 
based  upon  the  principle  of  the  Statute  of  Mo- 
nopolies which  excepted  from  prohibition  patents 
granting  the  privilege  of  "  the  sole  working  or 
making  of  any  manner  of  new  manufactures  to 
the  true  and  first  inventor  of  such  manufacture, 
which  others  at  the  time  of  making  such  letters 
patent  and  grants  should  not  use,  so  they  be  not 
contrary  to  law,  nor  mischievous  to  the  state  by 
raising  prices  of  commodities  at  home  or  hurt  of 
trade  or  generally  inconvenient." 

In  Great  Britain  the  power  of  granting  patents 
rests  with  the  King,  as  part  of  the  royal  preroga- 
tive. Patents  are  granted  for  fourteen  years  from 
the  date  of  issue.  Under  certain  circumstances 
a  patent  may  be  extended  or  renewed  for  seven 
or  fourteen  years  more.  Patent  rights  can  be  en- 
forced only  by  a  suit  at  law.  The  validity  of  a 
patent  is  held  to  depend  upon  three  main  condi- 
tions. First,  "  the  invention  must  possess  a  cer- 
tain amount  of  utility;  must  display  some  degree 
of  novelty;  and  must  have  been  obtained  by  the 
exercise  of  some  measure  of  ingenuity."    Second, 


96     MONOPOLIES   PAST   AND    PRESENT. 

"  the  patentee  must  be  the  true  and  first  inventor: 
that  is,  he  must  not  have  obtained  the  invention 
from  another  person,  unless  imported  from  abroad, 
nor  from  a  printed  book,  nor  from  a  patent  speci- 
fication published  in  this  country  or  introduced 
from  abroad."  Third,  "  the  specification  must  be 
accurate,  intelligible  and  sufficient;  it  must  point 
out  distinctly  what  the  patentee  claims  as  his  own 
and  must  not  claim  anything  that  is  not  his  own." 

The  patent  law  of  the  United  States  is  very 
liberal  in  its  provisions.  The  Patent  Office  is  or- 
ganized under  the  Department  of  the  Interior. 
At  its  head  is  the  Commissioner  of  Patents  and 
under  him  are  more  than  a  hundred  skilled  exam- 
iners, besides  a  large  force  of  clerks  and  other 
assistants.  "  Any  person,  native  or  foreign,  who 
has  invented  or  discovered  any  new  and  useful 
art,  machine,  manufacture  or  composition  of  mat- 
ter or  any  new  and  useful  improvement  thereof, 
not  known  or  used  in  this  country,  and  not  pat- 
ented or  described  in  any  publication  in  this  or 
any  foreign  country,  before  his  invention  or  dis- 
covery thereof,  and  not  in  public  use  or  on  sale 
for  more  than  two  years  prior  to  his  application 
unless  the  same  is  proved  to  have  been  abandoned, 
may  upon  payment  of  the  fees  required  by  law 
and  other  due  proceedings  had,  obtain  a  patent 
therefor." 

The  person  applying  for  a  patent  must  make 


PATENTS  AND  COPYRIOUTS.  9Y 

an  application  to  the  Commissioner  of  Patents, 
accompanied  by  a  fee  of  fifteen  dollars  and  a  speci- 
fication explaining  the  nature  of  the  invention 
and  the  best  mode  of  using  it.  Drawings  are  re- 
quired when  possible. 

After  the  application  has  been  made  and  the 
prescribed  oath  taken,  the  application  is  referred 
to  the  examiners,  who  make  a  thorough  investiga- 
tion to  determine  whether  the  invention  be  patent- 
able or  not.  After  a  favorable  report  of  the 
examiners  the  patent  is  granted  upon  payment  of 
a  second  fee  of  tw^enty  dollars.  The  patent  grants 
to  the  inventor  the  sole  right  to  manufacture  and 
sell  the  invention  for  a  period  of  seventeen  years. 
N^o  further  fees  are  required,  except  for  special 
services,  and  no  conditions  are  imposed  compel- 
ling the  inventor  to  use  his  invention  or  to  put 
it  upon  the  market.  Improvements  in  the  original 
invention  must  be  protected  by  new  patents.  If 
an  invention  has  been  previously  patented  abroad, 
the  American  patent  expires  at  the  same  time  as 
the  foreign  patent. 

A  patent  can  be  assigned  or  bequeathed  like 
any  other  property.  Trade-marks  and  labels  may 
be  registered  at  the  Patent  Office  and  exclusive 
right  to  use  thereby  acquired. 

On  account  of  the  searching  examination  to 
which  the  application  has  been  submitted,  it  is 
extremely  difficult  to  have  a  patent  declared  in- 
7 


98  MONOPOLIES   PAST   AND    PRESENT. 

valid  by  a  suit  at  law,  there  being  a  presumption 
of  validity  in  favor  of  the  patentee.  In  this  re- 
spect the  patent  law  of  the  United  States  is  su- 
perior to  that  of  England.  The  patent  law  of 
the  United  States  is  generally  considered  to  have 
greatly  stimulated  invention  and  discovery.  In 
the  year  1898  no  less  than  20,404  original  pat- 
ents and  1,803  patents  for  designs  were  issued 
by  the  Patent  Office.  In  that  year  only  sixty 
patents  were  reissued.  To  what  extent  the  nu- 
merous inventions  have  been  due  to  the  excellence 
of  the  patent  law,  rather  than  to  the  natural  in- 
ventiveness of  Americans,  it  would  be  hard  to 
determine. 

On  March  20,  1883,  a  Convention  w^as  signed 
by  representatives  of  various  governments  for  the 
purpose  of  establishing  "  A  Union  for  the  Pro- 
tection of  Industrial  Property."  Article  II  of 
the  Convention  provided  that  "  the  subjects  or 
citizens  of  each  state  enjoy  in  all  the  other  states 
the  same  advantages  as  regards  patents  of  every 
kind  that  their  respective  laws  grant  to  their  own 
subjects  or  citizens."  The  Union  at  present  in- 
cludes the  United  States,  Great  Britain,  France, 
Italy,  Spain,  Portugal,  Sweden,  Switzerland  and 
other  countries  and  its  central  office  is  in  Switzer- 
land. 

Patents  are  commonly  considered  to  be  among 
the  most  justifiable  of  monopolies.     While  there 


PAT  EXT  H  AND  COPYRIGHTS.  99 

were  many  unjustifiable  monopolies  in  the  reign 
of  Queen  Elizabeth  and  at  other  times,  there  were 
also  many  that  were  granted  on  sound  principles 
or  at  least  for  plausible  reasons.  According  to 
the  common  law  as  quoted  by  Coke,  an  inventor 
or  the  importer  of  an  invention  from  abroad  might 
justly  be  granted  a  temporary  monopoly  in  order 
to  encourage  the  establishment  of  a  new  industry. 
Thus  in  the  year  15G5  a  patent  for  the  manufac- 
ture of  brimstone  was  granted  to  Wade  and  Ilerlle 
for  thirty  years.  Similarly  a  patent  for  a  new 
process  of  manufacturing  salt  was  granted  to  the 
Earl  of  Pembroke  and  others  for  a  term  of  twenty 
years.  It  is  to  be  assimied  that  these  "  infant 
industries  "  became  afterward  self-supporting. 
The  system  of  patents  was  part  of  the  general 
system  of  fostering  industry  so  prevalent  in  the 
Middle  Ages,  so  characteristic  of  the  mercantile 
system  and  so  strongly  upheld  by  modern  advo- 
cates of  protective  tariffs.  It  is  to  be  classed  with 
the  charters  and  liberties  of  gilds,  with  privileges 
granted  to  regulated  and  joint-stock  companies, 
with  bounties  and  with  protective  tariffs. 

At  the  present  time  the  English  theory  of  pat- 
ents holds  that  the  monopoly  is  granted  to  the 
patentee  as  a  reward  for  making  his  invention 
known  to  the  public.  This  is  a  justification  on 
legal  rather  than  on  economic  grounds.  The 
American  theory  that  the  patent  law  exists  as  an 


100     MONOPOLIES    PAST   AND    PRESENT. 

encouragement  to  invention  is  the  best  justifica- 
tion of  the  system.  To  say  with  Professor  Had- 
ley  that  the  real  justification  of  the  system  lies 
in  the  fact  that  "  it  makes  it  safe  for  a  capitalist 
to  develop  a  new  process"  is  to  assert  the  necessity 
of  a  system  of  bounties  and  tariffs  in  aid  of  all 
new  undertakings.  Are  we  to  suppose  that  the 
introduction  of  the  cotton  gin  would  have  been 
more  rapid  under  a  rigid  patent?  Would  the  tele- 
phone have  been  more  slowly  introduced  by  com- 
peting companies  than  by  one  great  company  pro- 
tected by  patents?  Would  the  bicycle  have  been 
improved  less  rapidly  under  a  system  of  free  com- 
petition? Has  the  American  packing  industry 
been  developed  by  means  of  patents?  Has  the 
growth  of  the  modern  department-store  been  as- 
sisted by  exclusive  privileges?  Is  it  not  true  that 
great  inducements  to  the  introduction  of  improved 
methods  in  business  are  offered  by  the  natural 
profits  of  early  enterprise,  without  the  added  stim- 
ulus of  monopoly  profits?  While  it  may  be  true 
that  in  certain  cases  capitalists  require  encourage- 
ment, it  is  probably  true  that  unless  patents  are 
justifiable  on  the  ground  of  encouragement  to  in- 
ventors their  justification  is  very  slight  indeed. 
It  can  hardly  be  doubted  that  capitalists  are  less 
in  need  of  encouragement  than  the  majority  of 
inventors,  who,  mthout  some  pecuniary  incentive, 
would  hardly  waste  their  time  in  producing  or 
perfecting  new  inventions. 


PATENT."^  AND  COPYRIGHTS.  101 

The  objections  to  the  present  system  of  patents 
are  chiefly  three.  In  the  first  place,  it  is  held 
that  while  the  prospect  of  monopoly  profits  does 
act  as  an  incentive  to  many  inventors,  the  great 
majority  of  trnc  inventors  have  been  impelled  by 
their  natural  genius  and  love  for  inventing  and 
not  by  any  hope  of  material  reward.  Inventions 
and  discoveries  would,  it  is  claimed,  be  made  with- 
out any  system  of  patents  and  therefore  such  a 
system  is  useless  and  unnecessary. 

Secondly,  the  fact  is  pointed  out  that  only  in 
rare  cases  do  inventors  become  rich  as  the  result 
of  the  sale  of  their  inventions.  In  the  vast  ma- 
jority of  cases  they  have  lived  and  died  in  mod- 
erate circumstances,  if  not  in  actual  poverty.  It 
is  one  thing  to  invent;  it  is  another  to  put 
the  invention  upon  the  market.  In  the  former 
case  inventive  genius  is  sufiicient;  in  the  latter 
the  aid  of  capital  and  talent  in  business  is  neces- 
sary. Inventors  are  not  often  capitalists  as  well. 
It  is  easy  to  obtain  a  patent;  it  is  not  so  easy  to 
procure  a  capitalist.  The  capitalist  will  not  lend 
his  money  for  nothing.  He  will  agree  to  manu- 
facture the  invention  and  to  put  it  on  the  market, 
provided  that  he  be  given  the  lion's  share  of  the 
profits.  Under  the  power  of  a  trust  the  inventor's 
position  is  even  worse.  One  of  the  reasons  given 
for  the  formation  of  a  recent  consolidation  was  that 
it  would  give  to  the  combined  capitalists  a  great 


102     MONOPOLIES    PAST   AND    PRESENT. 

advantage  in  dealing  with  inventors.  Instead  of 
paying  them  "  exorbitant "  royalties  they  would 
thereafter  buy  an  invention  at  a  certain  price  and 
enjoy  the  full  benefit  of  future  profits. 

Thirdly,  it  is  held  that  patents  often  contribute 
to  the  growth  and  power  of  monopolies  that  con- 
tinue to  exist  even  after  the  patents  have  expired. 
The  patents  are  compared  to  the  scaffolding  of  a 
building  that  may  be  removed  when  the  building 
is  fijiished,  without  damage  to  its  stability.  The 
great  telephone  companies  and  the  great  telegraph 
companies  are  said  to  be  monopolies  of  this  de- 
ecription. 

It  is  not  difficult  to  show  that  the  present  system 
of  granting  patents  is  by  no  means  perfect  but  it  is 
not  easy  to  suggest  a  better  system.  The  present 
patent  law  is  the  growth  of  centuries  and  is  fairly 
satisfactory  in  its  workings.  It  may  be  better  to 
introduce  certain  reforms  in  the  present  system 
rather  than  to  endeavor  to  establish  a  new  and 
untried  system.  The  chief  reforms  suggested  by 
commissioners  of  patents  are  thus  mentioned  by 
Professor  Ely:  "  One  is  for  the  government  to 
reserve  the  right  to  purchase  any  patent  at  an 
appraised  valuation.  So,  if  the  Bell  Telephone 
people,  for  example,  have  a  patent  which  is  ob- 
jectionable, the  right  to  purchase  it  at  a  price 
fixed  by  a  commission  and  then  to  throw  it  open 
to  the  public  would  be  reserved.  A  second  remedy 
IB  to  grant  patents  only  on  condition  that  the  use 


PATENTS  AND  COPYRIGHTS.  103 

of  the  patent  shall  be  free  to  anyone  on  payment 
to  its  owner  of  a  reasonable  royalty,  the  amount 
of  which  conld  be  determined  by  a  board  in  ac- 
cordance with  carefully  elal)orated  principles. 
Another  is  to  put  a  tax,  increasing  each  year,  on 
the  use  of  patents,  and  to  let  those  lapse  on  which 
the  tax  is  not  paid.  Another  is  to  provide  for- 
feiture for  the  non-use  of  patents." 

Closely  allied  to  the  patent  law  is  the  law  of 
copyright.  Copyright  is  "  the  exclusive  right  to 
multiply  for  sale  copies  of  works  of  literature  or 
art."  Copyright  is  of  comparatively  recent 
origin.  It  was  not  known  in  ancient  times. 
When  Homer  sang  there  was  no  law  to  prevent 
other  singers  from  learning  and  repeating  hia 
songs,  whether  for  money  or  glory.  When  litera- 
ture came  to  be  written,  it  was  not  unlawful  to 
copy  an  author's  manuscript,  provided  the  scribe 
could  get  a  manuscript  to  copy.  What  profit 
there  might  be  would  in  general  go  to  the  scribe 
rather  than  to  the  author. 

It  was  not  until  the  invention  of  printing  that 
the  reproduction  of  manuscripts  became  a  very 
profitable  industry.  It  was  then  that  authors  be- 
gan to  claim  the  exclusive  privilege  of  reproduc- 
ing their  own  works.  Gutenberg  published  his 
first  printed  book  at  Maintz  in  the  year  1451. 
According  to  Brander  Matthews,  the  first  recorded 
instance  of  copyright  was  in  the  year  1469  when 
the  Senate  of  Venice  gave  to  John  of  Spira  the 


104     MONOPOLIES    PAST   AND    PRESENT. 

exclusive  right  for  five  years  to  print  the  epistles 
of  Cicero  and  Pliny.  This  was  a  publisher's  copy- 
right. The  first  instance  of  author's  copyright 
was  the  privilege  granted  in  the  year  1491  by 
Venice  to  Peter  of  Ravenna  to  print  and  sell 
his  "  Phoenix."  Similar  privileges  were  early 
granted  in  Germany,  France  and  England.  In 
the  year  1518  Richard  Pynson,  printer  to  the 
King  of  England,  issued  the  first  book  cu7n  privi- 
legio  and  in  1530  a  license  was  granted  to  John 
Palsgrave  to  print  and  sell  his  book  for  seven 
years,  in  consideration  of  its  value  and  the  time 
and  labor  spent  upon  it.  A  royal  edict  in  France 
in  the  year  1566  forbade  "  any  person  whatsoever 
printing  or  causing  to  be  printed  any  book  or 
treatise  without  leave  or  permission  of  the  King, 
and  letters  of  privilege." 

In  England  the  Stationers'  Company  was  char- 
tered by  Philip  and  Mary  to  prevent  the  propa- 
gation of  the  Protestant  Reformation.  In  1637  a 
"  Decree  of  the  Star  Chamber  concerning  Print- 
ing "  declared  "  that  no  person  or  persons  what- 
soever shall  at  any  time  print  or  cause  to  be 
printed  any  book  or  pamphlet  whatsoever  unless 
the  same  book  or  pamphlet  shall  first  be  lawfully 
licensed."  The  early  law  of  copyright  was  thus 
closely  connected  with  the  censorship  of  the  press 
and  the  encouragement  of  authors  and  printers 
was  often  a  matter  of  secondary  consideration. 


PATENTS  AND  COPYRIGHTS.  105 

Before  the  time  of  Queen  Anne  the  exclusive 
right  of  an  author  to  publish  and  sell  his  books 
depended  upon  the  common  law  of  the  realm  and 
on  this  ground  copyright  has  been  held  to  have 
been  perpetual  before  the  enactment  of  special 
legislation.  The  first  English  Copyright  law  was 
passed  in  the  reign  of  Queen  Anne,  in  the  year 
1710.  The  preamble  to  this  act  states  that 
printers,  booksellers  and  other  persons  were  fre- 
quently in  the  habit  of  printing,  reprinting  and 
publishing  "  books  and  other  writings  without  the 
consent  of  the  author  or  proprietors  of  such 
books  and  writings,  to  their  very  great  detriment 
and  too  often  to  the  ruin  of  them  and  their  fami- 
lies." The  act  goes  on  to  say:  "  For  preventing 
therefore  such  practices  in  the  future  and  for  the 
encouragement  of  learned  men  to  compose  and 
write  useful  books,  it  is  enacted  that  the  author 
of  any  book  or  books  already  printed  *  *  * 
shall  have  the  sole  right  and  liberty  of  printing 
such  book  or  books  for  the  term  of  one  and  twenty 
years."  The  author  of  a  book  thereafter  to  be 
printed  was  to  have  copyright  for  fourteen  years 
and  if  alive  at  the  end  of  that  time  he  could  have 
the  privilege  extended  for  fourteen  years  more. 
Penalties  were  provided  for  infringement  of 
copyright,  provided  that  the  books  were  duly  regis- 
tered at  Stationers'  Hall.  Provision  was  made 
for  the  fijcing  of  reasonable  prices  by  a  conmiis- 


106     MONOPOLIES    PAST   AND    PRESENT. 

sion  composed  of  the  Archbishop  of  Canterbury 
and  other  roval  officers.  Nine  copies  of  each 
book  were  to  be  provided  for  the  Rojal  Library, 
the  Universities  of  Oxford  and  Cambridge,  the 
four  Scotch  Universities,  Sion  College  and  the 
Faculty  of  Advocates  of  Edinburgh,  Although 
the  copyright  law  of  England  has  been  amended 
many  times,  the  present  law  is  based  upon  the 
Statute  of  Anne.  The  term  of  copyright  now 
extends  to  the  period  of  the  lifetime  of  the  au- 
thor and  seven  years  thereafter  or  to  a  period  of 
forty-two  years. 

The  copyright  law  of  the  United  States  is  also 
based  upon  the  Statute  of  Anne.  In  the  year 
1783,  on  a  motion  of  Madison,  Congress  recom- 
mended the  states  to  pass  acts  securing  copyright 
for  fourteen  years  and  such  acts  were  passed 
by  several  states.  Article  I  of  the  federal 
constitution  provides  as  follows:  "The  Congress 
shall  have  power  to  promote  the  progress  of  sci- 
ence and  useful  arts  by  securing  for  limited  times 
to  authors  and  inventors  the  exclusive  right  to 
their  respective  writings  and  discoveries."  In  the 
year  1790  the  first  federal  copyright  law  was 
passed.  It  followed  the  precedent  of  the  English 
act  of  1710  in  fixing  the  term  of  copyright  at 
fourteen  years,  with  renewal  for  fourteen  years 
more  if  the  author  were  living  at  the  expiration  of 
the  first  term. 


PATEXT.S  AXD  COPYRKlIlTii.  107 

Changes  in  the  copyright  law  have  been  made 
from  time  to  time.  In  1870  a  general  act  was 
passed  to  take  the  place  of  all  previous  acts.  Ac- 
cording to  the  law  of  copyright  as  in  force  July  1, 
1895,  the  administration  of  the  law  is  in  the  hands 
of  the  Librarian  of  Congress  and  the  supervisors 
of  the  Joint  Committee  of  Congress  on  the 
Library. 

"  The  author,  inventor,  designer,  or  proprietor 
of  any  book,  map,  chart,  dramatic  or  musical 
composition,  engraving,  cut,  print,  or  photograph, 
or  negative  thereof,  or  of  a  painting,  drawing, 
chromo,  statuary,  and  of  models  or  designs  in- 
tended to  be  perfected  as  works  of  fine  arts,  and 
the  executors,  administrators  or  assigns  of  any 
such  persons,  shall  upon  complying  with  the  pro- 
visions of  this  chapter  have  the  sole  liberty  of 
printing,  reprinting,  publishing,  completing,  copy- 
ing, executing,  finishing  and  vending  the  same  and 
in  the  case  of  a  dramatic  composition  of  publicly 
performing  the  same  or  causing  it  to  be  publicly 
performed  or  represented  by  others."  In  the 
case  of  a  book,  photograph,  chromo,  or  lithograph, 
two  copies  must  be  deposited  with  the  Librarian 
of  Congress  and  they  must  have  been  "  printed 
from  type,  set  within  the  limits  of  the  United 
States  or  from  plates  made  therefrom  or  from 
negatives  or  drawings  on  stone  made  within  the 
limits  of  the  United  States."     During  the  exist- 


108     MONOPOLIES    PAST   AND    PRESENT. 

ence  of  the  copyright  the  importation  of  such 
books,  etc.,  or  the  plates,  negatives,  or  drawings 
for  the  same,  is  prohibited,  except  in  certain  cases. 
The  fees  are  small,  being  fifty  cents  for  recording 
the  title,  or  one  dollar  for  a  person  not  a  citizen 
of  the  United  States,  together  with  other  small 
fees  for  special  services.  Penalties  are  estab- 
lished by  law  for  infringement  of  copyright.  In 
the  case  of  a  book,  every  copy  illegally  printed 
or  exposed  for  sale  may  be  forfeited  to  the  pro- 
prietor of  the  copyright  and  damages  may  be 
awarded  upon  civil  action  in  any  court  of  compe- 
tent jurisdiction.  The  term  of  copyright  is 
twenty-eight  years,  w'ith  renewal  for  fourteen 
years  more,  or  in  all  forty-two  years. 

Before  the  year  1891  aliens  could  not  obtain 
copyright  in  the  United  States.  The  result  of  this 
policy  was  very  injurious  to  American  authors. 
The  works  of  recent  British  writers  were  pub- 
lished at  very  low  prices  in  the  United  States  and 
were  largely  read  by  the  public,  to  the  exclusion 
of  the  works  of  native  authors,  which  were  pro- 
tected by  copyright  and  were  sold  at  higher 
prices.  British  writers  received  no  benefit  be- 
yond a  certain  addition  to  their  reputation.  The 
only  persons  benefited  were  the  publishers  of 
"  pirated  "  editions  of  British  w^orks  or  of  trans- 
lations of  French,  German  and  other  foreign 
works.     The  public,  it  is  true,  enjoyed  the  bene- 


PATENTS  AND  COPYRIGHTS.  109 

fit  of  cheap  books,  especially  of  cheap  fiction,  but 
the  growth  of  American  literature  was  discour- 
aged and  the  highest  interests  of  the  public  sacri- 
ficed for  a  temporary  and  questionable  advantage. 
As  Sir  Henry  Maine  said:  "  Their  neglect  to  ex- 
ercise their  power  for  the  advantage  of  foreign 
writers  has  condemned  the  whole  American  com- 
mimity  to  a  literary  servitude  unparalleled  in  the 
history  of  thought." 

The  struggle  for  international  copyright  be- 
gan at  an  early  period.  In  the  year  1837  Henry 
Clay  presented  to  the  United  States  Senate  a  pe- 
tition of  British  authors  asking  for  American 
copyright.  The  petition  was  referred  to  a  select 
committee  consisting  of  Clay,  Webster,  Buchanan 
and  Ewing.  The  committee  reported  in  favor  of 
granting  the  petition  and  presented  a  bill  grant- 
ing to  subjects  or  residents  of  the  United  King- 
dom or  of  France  the  privileges  in  regard  to  copy- 
right enjoyed  by  citizens  or  residents  of  the 
United  States  in  those  countries,  provided  that 
their  works  should  be  printed  and  published  in  the 
United  States  simultaneously  with  their  issue  in 
the  foreign  country.  Between  the  years  1837  and 
1840  the  bill  was  presented  in  the  Senate  no  less 
than  five  times  but  invariably  failed  to  pass. 
From  that  time  until  the  year  1891  frequent  at- 
tempts were  made  to  secure  a  measure  of  inter- 
national copyright  and  many  bills  were  presented 


110  MONOPOLIES   PAST   AXD   PRESENT. 

and  rejected.  The  movement  was  supported  by 
some  publishing  houses  of  high  standing  but  op- 
posed by  those  interested  in  the  publication  of 
cheap  editions  of  foreign  works  and  by  those  pub- 
lishers who  feared  injury  to  their  interests 
through  the  publication  of  English  books  by  Eng- 
lish firms.  They  claimed  that  books  sold  in  the 
United  States  ought  to  be  published  by  American 
houses.  The  readers  of  books  were  interested  in 
securing  cheap  books  and  were  inclined  to  oppose 
the  claims  of  the  American  publishers.  Finally, 
after  great  efforts  and  much  agitation,  the  Platt- 
Simonds  copyright  act  was  passed,  was  approved 
on  March  3,  1891,  and  took  effect  on  July  1  of 
that  year. 

This    act    was    a    compromise    measure.      It 
granted  to  the  citizens  of  foreign  states,  grant- 
ing similar  privileges  to   citizens  of  the  United 
States,  the  privileges  of  copyright  in  the  United 
States,    but    it    required,    as    above    stated,    that 
their    works    should    be    printed    in   the    United 
States.     Eoreign  authors  are  also  required  to  pub- 
lish the  American  edition  of  their  books  at  the 
same  time  with  the  foreign  edition.     This  is  a 
great   inconvenience,    especially  to    German   and 
French  authors.     The  act  has  been  of  consider- 
able advantage  to  British  authors  of  high  rank. 
American  writers  and  publishers  have  also  been 
benefited.     The   prices   of  recent   British  fiction 


PATENTS  AND  COPYRIGHTS.  Ill 

have  considerably  increased.  The  prices  of  stand- 
ard books  have  fallen  ratlier  than  otherwise,  be- 
cause of  the  extended  market.  Perhaps  sufficient 
time  has  not  elapsed  for  any  marked  improvement 
in  the  quantity  or  quality  of  American  literature, 
as  the  result  of  diminished  competition,  yet  a  num- 
ber of  American  novels  have  been  produced  dur- 
ing the  past  decade  that  can  stand  comparison  with 
the  best  of  recent  British  fiction.  They  have 
been  widely  read  and  have  proved  highly  profit- 
able to  authors  and  publishers. 

The  privileges  of  American  copyright  under  the 
act  of  1891  are  granted  to  the  United  Kingdom, 
France,  Germany,  Belgium,  Italy,  Denmark, 
Portugal,  Spain  and  Mexico. 

In  the  year  1887  representatives  of  the  United 
Kingdom,  France,  Germany,  Spain,  Holland, 
Italy,  Switzerland,  Ilaj-ti,  Liberia  and  Tunis  en- 
tered into  a  convention  in  order  "  to  jDrotect  effec- 
tively, and  in  as  uniform  a  manner  as  possible,  the 
rights  of  authors  over  their  literary  and  artistic 
works."  The  articles  of  union  w^ere  signed  at 
Berne  on  September  5,  1887.  Article  II  pro- 
vides that  "  authors  of  any  of  the  countries  of 
the  Union  or  their  la^vful  representatives  shall 
enjoy  in  the  other  countries  for  their  works, 
whether  published  in  one  of  these  countries  or  un- 
published, the  rights  which  the  respective  laws  do 
now  or  may  hereafter  grant  to  natives."      Pro- 


112     MONOPOLIES    PAST   AND    PRESENT. 

visions  are  made  for  the  admission  of  other 
countries  to  the  privileges  of  the  convention  and 
for  the  establishment  of  an  international  office  in 
Switzerland,  called  the  "  Office  of  the  Interna- 
tional Union  for  the  Protection  of  Literary  and 
Artistic  Works."  The  United  States  is  not  a 
member  of  the  International  Union  because  of  the 
law  requiring  that  copyrighted  works  be  published 
in  the  United  States.  The  Montevideo  Conven- 
tion of  1889  established  a  similar  union  between 
Argentina,  Bolivia,  Brazil,  Chili,  Paraguay,  Peru 
and  Uruguay. 

The  periods  for  which  copyright  is  granted  dif- 
fer in  different  countries.  In  Mexico  copyright 
is  perpetual.  In  Spain  it  continues  during  the 
author's  life  and  eighty  years  thereafter.  In 
Russia  and  France  the  period  includes  the  author's 
life  and  fifty  years  after;  in  Germany,  Austria 
and  Switzerland  the  author's  life  and  thirty  years 
after,  Denmark  and  Holland  grant  copyright  for 
fifty  years.  In  England  and  in  the  United  States 
the  period  is  shorter  than  in  almost  any  other 
country.  Twenty-six  countries  permit  foreigners 
to  obtain  copyright  on  the  same  terms  as  their  own 
citizens. 

Copyrights  are  intended  primarily  for  the  en- 
couragement of  authors  and  not  for  the  protec- 
tion of  publishers.     The  fact  that  publishers  so 


PATENTS  AND  COPYRIOnTS.  113 

readily  issue  books  not  protected  by  copyright  is 
a  proof  of  that  fact.  Still,  the  publication  as  well 
as  the  writing  of  books  is  no  doubt  encouraged 
by  copyright,  and  the  interests  of  authors,  pub- 
lishers and  public  are  to  a  large  extent  in  har- 
mony. A  copyright,  like  a  patent,  is  a  grant  of 
monopoly.  The  owner  of  a  copyright  has  the  ex- 
clusive right  to  manufacture  and  sell  the  book 
or  other  article  copyrighted,  just  as  a  patentee  has 
the  exclusive  right  to  manufacture  and  sell 
"  copies  "  of  his  invention.  In  each  case  the  sup- 
ply of  the  article  is  in  control  of  a  single  person 
and  there  can  be  no  la^vful  competition.  If  the 
book  or  invention  be  of  no  use  to  the  community, 
the  monopoly  mil  be  a  profitless  one,  lacking  the 
essential  element  of  effective  monopoly,  the  power 
of  controlling  market  price.  If,  on  the  other 
hand,  there  be  a  considerable  demand  for  the  book 
or  invention,  the  price  will  be  fixed  by  the  owner 
of  copyright  or  patent,  not  in  accordance  with  the 
principle  of  cost  of  production,  but  according  to 
the  principle  of  greatest  net  returns.  The  price 
will  be  ten  cents  or  fifty  cents  or  two  dollars,  ac- 
cording to  the  amount  of  net  returns.  Yet  even 
here  competition  is  not  entirely  excluded,  for  if 
the  price  be  set  too  high  the  public  will  be  con- 
tent Tvith  inferior  books  or  inventions  or  will  not 
use  them  at  all.  Under  the  most  favorable  cir- 
8 


114    MOXOPOLIES   PAST   AND   PRESENT. 

cunistaiices  flie  monopoly  gives  but  a  limited 
degree  of  price  control  and  may  therefore  in  a 
sense  be  called  a  partial  monopoly. 

The  monopoly  is  also  temporary.  It  has  been 
claimed  that  under  the  common  law  the  author 
and  his  heirs  have  a  perpetual  copyright,  but  it 
is  probable  that  this  right  was  taken  away  by  the 
Statute  of  1710'  and  by  later  British  and  American 
Statutes.  The  argument  in  favor  of  perpetual 
copyright  is  now  based  upon  the  contention  that 
an  intellectual  j^roduct  is  as  much  the  property  of 
the  author  as  a  piece  of  land,  a  horse,  a  fish  or 
any  other  material  property  which  he  has  created 
or  improved.  It  is  not  difficult  to  show  that  there 
is  a  difference  between  the  right  to  a  piece  of 
property  and  the  right  to  multiply  copies  of  a 
book,  yet  the  hardship  resulting  from  perpetual 
copyright  would  be  insignificant  comj)ared  with 
the  evils  of  the  unequal  distribution  of  wealth, 
resulting  from  the  recognized  sanctity  of  material 
property.  Under  perpetual  copyright  the  descend- 
ant^ or  heirs  of  Shakespeare  would  receive  an  im- 
mense income  from  royalties  and  might  compare 
in  wealth  with  the  great  landowners,  the  railway 
magnates  and  the  manufacturers  of  the  present 
day.  The  literary  heirs  of  Bacon  and  Spenser 
would  not  enjoy  an  excessive  income,  while  the 
heirs  of  Sidney  and  Raleigh  could  hardly  live  in 
affluence  on  their  royalties  alone. 


PATENTS  AND  COPYRIGHTS.  115 

The  justification  of  patents  and  copyrights  rests 
upon  two  principles.  The  one  declares  that  those 
who  serve  the  pnblic  should  receive  an  adequate 
reward.  The  other  asserts  that  any  system  is  jus- 
tifiable which  best  secures  the  public  welfare. 
The  justification  of  private  property  rests  upon 
the  same  grounds. 


VI. 
MUNICIPAL  MONOPOLIES. 


E.  W.  Bemis  (Ed.),  "Municipal  Monopolies,"'  New  York, 
1899. 

A.  H.  Sinclair,  "  Municipal  INIonopolies  and  Their  Manage- 
ment," Toronto,  1891. 

Albert  Shaw,  "  Municipal  Government  in  Great  Britain," 
New  York,  1895. 

Albert  Shaw,  "  IMunicipal  Government  in  Continental 
Europe,"  New  York,  1895. 

A.  R.  CoNKLiNG.  "  City  Government  in  tlie  United  States," 
New  York,  1900. 

D.  B.  Eaton.  "  Tlie  Government  of  Municipalities,"  New 
York,   1899 

D.  F.    Wilcox,    "  The    Stud  w    of   City   Government,"    New 

York,  1897. 
Frederick    Dolman,    "  Municipalities   at    Work,"   London 

1895. 
T.  C.  Devi.in,  "  IMunicipal   Reform  in   the  United  States," 

Isew  York,  1896. 
R.  B.  Porter,  "  Municipal  Ownership,"  New  York,  1898. 
W.    H.    ToLMAN,    "  Municipal    Reform    Movements    in    the 

United  States,"  Chicago,  1895. 
W.  M.  Daniels,  "  The  Elements  of  Public  Finance,"  New 

York,  1899. 
F.  J.  GOODNOW,  "Municipal  Problems."  New  York,  1897. 

E.  W.    Bemis,    "Municipal    Monopolies,"    in    "Progress" 

December,  1899. 
"Municipal  Affairs,"  1897-1901. 
A.  R.  Foote,  "  Cost  of  Service  to  Users  and  Tax  Payers," 

Cincinnati,    1897. 
Proceedings    of    the    National    Conference    for    Good    City 

Government^  Philadelphia,  1894-1899. 
Publications   of    the   American    Academy   of    Political    and 

Social  Science. 
Publications  of  the  American  Economic  Association. 


118 


CHAPTER  VI. 


MUNICIPAL   MONOPOLIES. 


The  enormous  growth  of  cities  during  the  pres- 
ent century  is  directly  traceable  to  the  Industrial 
Revolution,  and  has  taken  place  in  every  country 
that  has  adopted  modern  methods  of  production. 
It  was  first  observed  in  England,  later  on  the  con- 
tinent of  Europe  and  still  later  in  America,  In 
the  year  1790  only  3.35  per  cent,  of  the  popula- 
tion of  the  United  States  lived  in  cities  of  8,000 
inhabitants  and  over.  In  the  year  1850,  the  per- 
centage was  12.49,  and  in  the  year  1890,  the 
urban  population  of  the  United  States  amounted 
to  29.20  per  cent,  of  the  total  population.  At 
the  present  time  it  may  safely  be  said  that  one- 
third  of  the  population  of  the  United  States  live 
in  cities  of  8,000  inhabitants  and  over.  In  the 
year  1891,  61  per  cent,  of  the  population  of  Eng- 
land and  Wales  lived  in  towns  with  a  population 
of  10,000  and  over,  while  70  per  cent,  of  the 
population  was  classed  as  urban,  living  in  towns 
of  3,000  inhabitants  and  over.  In  the  year  1891, 
47  per  cent,  of  the  population  of  the  German 
Empire  and  in  the  year  1890,  37  per  cent,  of  the 
population  of  France,  lived  in  towns  of  2,000  in- 
habitants and  over, 

119 


120  MOXOPOIJFS   PAST   AND    PRESENT. 

While  the  cities  of  recent  times  have  greatly 
increased  in  population,  they  have  been  vastly  im- 
proved in  many  ways,  such  as  were  hardly  dreamed 
of  in  ancient  and  mediaeval  times.  We  have  sys- 
tems of  sewerage  and  paving  and  distribution  of 
vs^ater  more  perfect  than  the  world  has  ever  seen 
before.  The  systems  of  lighting  and  transporta- 
tion are  the  product  of  the  nineteenth  century, 
while  the  miracle  of  the  telephone  has  come  to 
pass  in  the  lifetime  of  men  not  thirty  years  old. 
Other  improvements  have  been  made  in  the  es- 
tablishment of  public  parks,  markets,  museums, 
hospitals,  heating  plants,  pneumatic  tubes,  all  of 
which  combine  to  render  the  modern  city  a  veri- 
table paradise  compared  with  the  reeking  discom- 
fort of  "  modern  "  Pekin,  of  mediaeval  London 
or  of  ancient  Nineveh.  Because  of  the  great  ur- 
ban populations  and  because  of  the  improvements 
in  city  life,  the  problems  of  municipal  govern- 
ment have  attained  an  importance  which  they 
never  had  before. 

Mnnicipal  monopolies  are  the  product  of  mu- 
nicipal improvements.  In  nearly  all  of  these  there 
is  a  general  tendency  toward  unification  of  sys- 
tem and  management  and  therefore  toward  mo- 
nopoly. A  double  system  of  sewer  pipes  throug"!- 
out  a  city  would  be  an  intolerable  nuisance. 
Before  the  introduction  of  the  underground  sys- 
tem there  might  be  as  many  scavengers  as  could 


MCxrrrrAL  uoxopolter.  121 

find  employment,  although  even  then  there  were 
advantages  in  a  unified  system.  When  the  im- 
proved system  was  introduced,  monopoly  was  es- 
tablished. In  general  and  for  obvious  reasons,  it 
was  a  monopoly  owned  and  managed  by  the  city 
government. 

A  duplicate  system  of  water-works  would  be 
only  less  absurd  and  wasteful  than  a  double  sys- 
tem of  sewers.  When  one  system  of  pipes  is  laid 
in  the  streets  and  when  connections  are  made  with 
all  the  buildings,  no  other  system  is  necessary. 
The  creation  of  a  second  system  would  involve 
the  tearing  up  of  the  streets  and  a  great  waste  of 
capital,  such  as  could  be  justified  only  under  the 
most  extraordinary  circumstances.  The  water 
supply  of  a  city  is  therefore  by  nature  under  mo- 
nopoly control.  If  there  is  one  system  through- 
out the  city  there  is  one  monopoly.  If  there  is 
one  system  in  one  part  of  the  city  and  another 
system  in  another  part,  there  are  two  monopolies. 
The  systems  do  not  compete  with  one  another, 
for  they  supply  different  parts  of  the  city. 

Water-works  were  at  first  largely  o^vned  and 
managed  by  private  companies  but  gradually  they 
came  to  be  more  and  more  under  public  owner- 
ship and  control.  In  the  vear  1801,  but  one  citv 
in  the  United  States  ownacd  its  ovm  water-works, 
while  in  fifteen  cities  the  water-works  were  OAvned 
by  private  companies.     In  other  words  6.3  per 


122    MONOPOLIES   PAST   AND    PRESENT. 

cent,  of  the  water-works  were  publicly  owned  and 
93. Y  per  cent,  were  owned  by  private  companies. 
In  1875,  53.8  per  cent,  were  public  and  46.2  per 
cent,  were  private,  while  in  1896,  53.2  per  cent, 
were  public  and  46.8  per  cent,  were  private. 

Before  the  introduction  of  illuminating  gas  at 
the  beginning  of  the  nineteenth  century  the 
streets  of  great  cities  were  almost  as  dark  at  night 
as  those  of  country  villages.  A  few  oil  lamps 
served  to  render  darkness  visible.  The  use  of 
gas  produced  a  great  improvement  and  the  use 
of  electricity  marked  another  tremendous  step  in 
advance.  The  streets  of  many  cities  are  now  as 
bright  by  night  as  by  day.  At  first  private  enter- 
prise built  and  managed  gas-works.  After  a  time 
the  municipalities  began  to  undertake  this  work 
for  themselves,  especially  in  England  and  on  the 
continent  of  Europe.  Forty-one  out  of  fifty-four 
large  German  towns  and  thirty-two  out  of  sixty- 
five  English  towns  now  own  their  own  gas  plants. 
In  the  United  States  only  thirteen  cities  operate 
their  own  gas-works.  The  city  of  Philadelphia 
operated  its  own  gas-works  for  fifty-six  years,  but 
in  the  year  1897  the  gas-works  were  leased  to  a 
private  company  for  a  period  of  thirty  years  on 
terms  little  better  than  were  enjoyed  under  public 
ownership.  In  the  United  States  there  are  now 
about  four  hundred  publicly-owned  plants  for  the 
production  of  electric  light. 


MUXTCiPAL   M 0X0 rOLTEFi.  123 

Street  railways,  whether  rim  by  horsepower,  by 
cable  or  by  electricity,  have  generally  been  owned 
and  managed  by  private  companies.  At  present 
some  nineteen  towns  in  Great  Britain  operate 
their  o\\'n  street  railways  and  among  these  Glas- 
gow and  Sheffield  have  been  especially  successful. 
In  the  United  States  street  railways  are  all  owned 
by  private  companies. 

Telephone  lines  have  been  under  private  man- 
agement because  of  the  existence  of  patents,  but 
since  the  expiration  of  some  of  the  patents  the 
field  has  been  open  for  the  establishment  of  mu- 
nicipal OAvnership.  The  city  of  Amsterdam  has 
lately  entered  this  field  with  considerable  success. 

In  all  these  cases  there  is  a  constant  tendency 
toward  the  creation  of  greater  and  more  powerful 
monopolies.  Under  the  system  of  private  owner- 
ship the  people  have  often  complained  of  high 
prices  and  as  often  have  demanded  that  competi- 
tion be  introduced  for  the  purpose  of  breaking 
down  the  monopoly.  Competition  has  been  intro- 
duced in  many  cases  but  in  general  the  result, 
whether  in  the  case  of  gas-lighting,  electric-light- 
ing, street  railways  or  telephones,  has  been  dis- 
appointing to  the  public  and  injurious  to  the  in- 
vestor. Sooner  or  later  agreement  or  consolida- 
tion has  put  an  end  to  wars  of  rates,  with  nobody 
the  better  for  a  foolish  waste  of  capital.  It  is 
now  pretty  well  recognized  that  competition  can- 


124    MONOPOLIES   PAST   AND    PRESENT. 

not  remedy  the  abuses  connected  with  the  private 
ownership  of  municipal  monopolies. 

Under  the  system  of  private  ownership  without 
public  control  prices  are  regulated  by  the  private 
company,  which  is  therefore  the  monopolist.  As 
in  the  case  of  all  monopolies,  prices  are  regulated 
according  to  the  principle  of  the  greatest  net  re- 
turns, as  modified  by  minor  considerations,  such 
as  philanthropy  and  a  far-sighted  prudential  pol- 
icy. The  company  will  in  general  avoid  oppressing 
the  public  too  much,  in  fear  of  competitors  or  in 
fear  that  the  people  may  demand  legislation  un- 
favorable to  the  monopolist.  Just  as  a  ball  thrown 
upward  and  outward  tends  to  move  in  a  parabolic 
curve  but  actually  does  not  describe  a  parabola, 
because  of  the  shape  of  the  ball  and  the  resistance 
of  the  air,  so  the  price  of  gas  tends  to  move  in 
the  curve  of  greatest  net  returns  but  actually 
varies  considerably  from  the  theoretical  course 
and  it  is  impossible  to  calculate  accurately  the 
course  it  will  pursue.  The  power  of  competition 
is  not  entirely  excluded  in  this  case,  for  if  gas  be 
too  high  people  will  use  electricity  or  oil  or  can- 
dles. The  maximum  price  of  gas  is  therefore 
fixed  by  competition.  Below  that  point  the  price 
is  fixed  by  the  w^ill  of  the  monopolist.  On  the 
other  hand,  the  price  of  water  could  be  very  high, 
for  water  could  be  supplied  by  water-carriers  only 
at  great  cost  and  much  inconvenience.    A  private 


MUNICIPAL  MONOPOLIES.  125 

water  company  would  not  dare  to  exert  its  full 
power  in  this  respect,  for  its  power  would  then 
surely  be  of  brief  duration. 

The  monopoly  power  of  street-railway  compa- 
nies is  modified  by  the  use  of  horses  and  bicycles 
and  by  the  possibility  of  walking,  yet  the  fare 
may  be  a  monopoly  rate,  provided  that  it  is  not 
regulated  throughout  by  the  influence  of  competi- 
tors. The  fact  that  a  street-railway  company,  if 
not  controlled  by  the  city  government,  could 
charge  some  passengers  ten  cents,  others  twenty 
cents  and  others  fifty  cents,  for  the  same  service, 
shows  that  it  has  the  powers  of  monopoly,  for 
where  there  is  free  competition  any  given  article 
or  service  has  a  market  price  equal  to  that  of  any 
other  article  or  service  of  the  same  kind,  in  the 
same  market,  at  the  same  time  and  under  the  same 
conditions.  AVliere  there  are  or  can  be  two  or 
more  prices  for  the  same  article  in  the  same  mar- 
ket there  is  more  or  less  of  monopoly  involved. 

When  water-works,  gas-works,  tramways  and 
telephones  were  first  introduced,  the  companies 
were  in  general  greatly  encouraged  by  the  public 
and  by  the  municipal  authorities.  The  use  of  the 
streets  was  often  freely  granted  to  them  and  few 
if  any  conditions  and  restrictions  were  imposed 
upon  them.  Extreme  confidence  was  placed  in 
the  enterprise,  integrity  and  philanthropy  of  capi- 
talists  who   promised   so   much.      Bonuses  were 


126  MONOPOLIES   PAST   AND    PRESENT. 

given  to  encourage  them  in  their  good  work  and 
their  praises  were  sung  bj  high  and  low.  That 
time  has  passed  away.  Now  the  people  and  the 
authorities  realize  the  value  of  franchises  and  arc 
disposed  to  sell  them  at  their  full  value  and  even 
to  demand  more  than  their  value  and  to  hedge, 
private  companies  about  with  all  sorts  of  condi- 
tions and  restrictions.  Prices  are  often,  if  not 
usually,  fixed  by  the  municipal  authorities.  When 
this  is  done  it  is  right  to  say  that  either  the  mu- 
nicipal government  is  the  monopolist  and  the  com- 
pany the  agent,  or  that  the  monopoly  power  is 
divided  between  the  government  and  the  company. 
The  person  who  fixes  the  price  is  the  real  mo- 
nopolist. The  seller  of  postage  stamps  is  not  a 
monopolist  but  the  agent  of  the  government, 
which  is  the  real  monopolist.  In  the  same  way, 
when  the  tramway  fare  is  fixed  at  five  cents  by 
contract  with  the  city,  part  at  least  of  the  power 
of  monopoly  is  taken  away  from  the  tramway 
company.  There  may  be,  however,  opportunities 
for  the  company  to  earn  monopoly  profits  by  re- 
ducing the  efficiency  of  the  service  or  the  wages 
of  employees  or  the  prices  paid  for  supplies. 
When  all  these  opportunities  are  taken  away  by 
the  stringency  of  the  contract,  the  company  may 
be  the  manager  of  a  monopoly,  but  the  city  gov- 
ernment is  the  monopolist. 

No  doubt  the  management  and  control  of  mu- 


MUNICIPAL  MONOPOLIES.  127 

nicipal  monopolies  ought  not  to  be  left  entirely 
in  the  hands  of  a  private  company.  The  com- 
pany onght  to  pay  for  the  franchise  and  the  people 
should  be  protected  against  extortionate  rates. 
A  contract  is  therefore  necessary.  There  is  no 
dispute  about  this.  There  is  room  for  difference 
of  opinion  only  concerning  the  terms  of  the  con- 
tract. Some  contracts  are  very  stringent.  Oth- 
ers are  very  lax.  Where  is  the  golden  mean? 
What  are  fair  terms?  Three  chief  theories  have 
been  advanced  in  answer  to  this  question  based 
respectively  on  utility  of  service,  cost  of  service 
and  market  value  of  service. 

From  the  standpoint  of  utility  they  say  that  a 
water  company  ought  to  be  recompensed  for  the 
great  service  it  has  done  the  public  and  that  in- 
asmuch as  the  new  system  is  a  great  improvement 
on  the  old  system  of  water-carriers,  the  public 
ought  to  be  willing  to  pay  as  much  as  the  com- 
pany demands,  or  else  return  to  the  abandoned 
method,  from  which  the  company  has  so  happily 
delivered  them.  The  water-rates  are  low  com- 
pared with  the  charges  of  water-carriers,  therefore 
the  people  who  complain  are  ungrateful  and  stupid 
and  ought  to  have  their  water  supply  shut  off. 
This  theory  seems  absurd  when  thus  badly  stated, 
but  it  is  frequently  advanced  in  a  much  more 
plausible  form. 

From  the  standpoint  of  cost  of  service  it  is  held 


128     MOXOPOLIES   PAST    AND    PRESENT. 

that  capital  invested  in  good  faith  ought  to  re- 
ceive adequate  returns.  What  are  adequate  re- 
turns? Well,  the  capitalist  ought  to  have  a  fair 
interest  on  his  money,  say  five  per  cent.  lie 
ought  also  to  have  further  returns  to  cover  risk; 
a  sort  of  insurance  premium.  lie  ought  also  to 
have  enough  to  form  a  sinking  fund,  so  that  at 
the  end  of  the  contract  period  he  may  have  his 
original  capital  returned  to  him.  Also  he  ought 
to  have  some  profit.  Every  business  man  wants 
profit  and  ought  to  have  it. 

However  reasonable  this  theory  may  seem,  it 
is  too  indefinite  for  practical  purposes  and  there 
is  too  much  room  for  blundering  and  dishonesty 
in  the  application  of  it.  Why  should  a  capitalist 
earn  five  per  cent,  interest  if  he  invest  his  money 
foolishly?  If  he  build  a  useless  reservoir  at  a 
cost  of  a  million  dollars,  why  should  he  expect  to 
earn  five  per  cent,  on  that  million?  If  he  manage 
the  company  extravagantly,  why  should  he  earn 
five  per  cent,  on  capital  thus  wasted?  Why 
should  he  have  any  insurance  against  risk?  There 
ought  to  be  no  risk,  despite  the  fallibility  of  mathe- 
maticians, the  unreliability  of  contractors  and  the 
duplicity  of  aldermen.  Or  if  we  admit  the  exist- 
ence of  risk,  if  the  future  can  be  said  to  exist,  we 
cannot  admit  the  existence  of  any  mathematical 
principle  which  would  accurately  determine  the 
quantity  of  risk,  the  probability  of  loss.     Why, 


MUNICIPAL  MONOPOLIES.  129 

again,  should  the  capitalist  be  so  greedy  as  to  de- 
mand profit?  With  his  market  ready  to  hand,  his 
five  per  cent,  interest,  his  risk  completely  covered, 
on  what  ground  does  he  claim  profits?  As  well 
claim  profits  on  an  investment  in  government 
bonds.  Profits  cannot  be  allowed.  And  w^hat 
shall  we  say  of  obscure  systems  of  bookkeeping, 
of  stock-watering,  of  secret  deals  with  politicians, 
of  the  thousand  and  one  little  circumstances  that 
modify  our  judgment  concerning  fair  and  unfair 
terms?  In  short,  the  cost  of  service  theory  is 
practically  if  not  theoretically  invalid. 

The  true  theory  is  the  market  value  theory, 
otherwise  known  as  the  bargain  theory.  When  a 
city  is  about  to  grant  a  franchise  for  a  term  of 
years  let  it  advertise  for  bids.  Capitalists  will 
then  make  estimates,  will  allow  for  interest,  in- 
surance and  profits  and  will  offer  to  take  the  con- 
tract on  terms  that  they  can  afford  to  make.  Other 
capitalists  will  propose  other  terms.  There  will 
be  initial  competition,  which  will  go  far  toward 
preventing  the  existence  of  monopoly  profits  for 
a  long  time  to  come.  The  city  will  sell  the  fran- 
chise on  the  most  favorable  terms.  The  company 
that  buys  it  will  do  so  with  its  eyes  open  and 
ready  to  take  its  chances  of  success  or  failure. 
The  city  will  get  a  good  service  at  low  rates  and 
the  company  will  earn  fair  dividends.     Provided 

that  there  be  no  combination  among  capitalists  to 
9 


130     MONOPOLIES   PAST   AND    PRESENT. 

defraud  the  city  and  provided  that  the  city  officials 
be  honest  enough  to  award  the  contract  to  the  com- 
pany offering  the  most  favorable  terms,  the  bar- 
gain method  will  secure  the  best  results  for  each 
and  all. 

There  are  many  varieties  of  contracts.  There 
are  long-time  contracts  and  short-time  contracts. 
There  are  contracts  that  hold  unchanged  for  the 
entire  period  and  contracts  subject  to  revision  at 
stated  intervals.  The  company  may  give  an  in- 
itial bonus  to  the  city,  in  payment  for  the  fran- 
chise, or  it  may  pay  a  fixed  sum  every  year,  or  it 
may  pay  a  percentage  of  the  net  profits  or  a  per- 
centage of  the  gross  returns.  The  company  may 
agree  to  supply  water  for  city  purposes  or  light 
for  city  lamps  free  of  charge  or  at  reduced  rates. 
The  contract  may  fix  rates,  whether  they  are  to 
be  uniform  for  the  whole  period  or  changing  at 
certain  intervals  of  time,  under  certain  changing 
conditions  or  at  the  will  of  a  commission  of 
supervisors. 

These  are  only  a  few  of  the  many  variations 
that  are  found  in  contracts  for  the  granting  of 
municipal  franchises.  No  doubt  some  forms  of 
contract  are  better  than  others,  but  more  import- 
ant than  any  form  of  contract  is  the  good  faith 
in  which  it  is  made.  The  contract  ought  to  be 
made  in  good  faith  by  both  parties  and  when  made 
it  ought  to  be  faithfully  executed.     It  is  neces- 


MUNICIPAL  MONOPOLIES.  131 

sary  that  the  city  government  treat  the  holders 
of  a  franchise  with  ahsolnte  faii-ness  and  it  is 
equally  necessary  that  similar  behavior  be  secured 
on  the  other  side.  A  city  government  that  plays 
fast  and  loose  with  the  rights  of  capitalists  cannot 
expect  to  make  favorable  terms  when  the  time 
comes  for  a  new  contract.  A  company  that  abuses 
its  privileges  cannot  expect  to  have  these  privileges 
renewed.  Good  city  government  and  good  faith 
in  the  making  and  carrying  out  of  contracts  have 
an  economic  value  that  is  hard  to  measure  in  dol- 
lars and  cents. 

The  let-alone  policy  is  not  adaptable  to  muni- 
cipal monopolies,  however  beneficial  that  policy 
may  be  in  the  ordinary  conduct  of  business. 
Wherever  monopoly  exists  the  interests  of  the 
people  are  so  intimately  concerned  as  to  render  a 
reasonable  degree  of  public  control  just  and  de- 
sirable. Because  of  this  general  public  interest 
and  because  of  special  privileges  in  regard  to  the 
use  of  the  public  streets,  it  may  rightly  be  said 
that  municipal  monopolies  possess  a  semi-public 
character  which  must  forever  exclude  the  policy 
of  let-alone.  The  problem  of  municipal  monopo- 
lies is  therefore  confined  to  the  respective  merits 
of  two  plans,  the  plan  of  public  ownership  and 
the  plan  of  private  ownership  with  public  control. 

There  is  much  to  be  said  in  favor  of  the  system 
of  private  ownership.  It  is  supported  by  priority  of 


132    MONOPOLIES   PAST   AND    PRESENT. 

existence  and  by  the  conservative  instincts  of  man- 
kind. It  is  also  justified  in  view  of  the  acquisitive 
instincts  of  human  beings.  Man  is  naturally  ac- 
quisitive. If  you  give  him  a  chance  he  will  work 
and  work  hard  to  acquire  the  greatest  possible 
amount  of  property  with  the  least  possible  expen- 
diture of  effort.  This  economy  of  effort  and 
relative  magnitude  of  result  is  peculiar  to  indi- 
vidual enterprise  carried  on  for  the  sake  of  private 
gain.  Public  officials  exhibit  a  highly  developed 
economy  of  effort  A\"itliout  a  corresponding  magni- 
tude of  result,  because  they  lack  the  stimulus  of 
the  hope  of  private  gain.  Therefore  a  private 
owner  and  to  a  less  degree  a  private  company, 
will  practice  economy  wherever  possible.  It  will 
build  its  plant  at  the  lowest  cost.  It  will  never 
pay  excessive  salaries.  It  will  dismiss  inefficient 
servants  without  fear  or  favor.  It  will  have  thor- 
ough system  in  its  management.  It  will  let  its 
contracts  on  the  most  favorable  terms.  It  will  in- 
troduce improved  machinery  and  methods  wher- 
ever they  are  likely  to  secure  a  saving  of  any  kind. 
It  will,  in  short,  display  enterprise  and  diligence 
and  good  management  and  thereby  the  total 
wealth  of  the  community  will  be  increased,  with- 
out loss  or  damage  to  anybody. 

It  is  no  injury  to  the  community  but  a  great 
and  positive  benefit  to  have  in  its  midst  men  of 
•wealth  who  have  earned  their  wealth  by  produc- 


MUNICIPAL  MONOPOLIES.  133 

ing  and  saving  and  not  by  acquiring  what  other 
men  have  produced.  If  it  is  true,  which  may 
perhaps  be  disputed,  that  the  Standard  Oil  mag- 
nates have  acquired  their  great  fortunes  by  econo- 
mies in  production  and  not  by  raising  the  price 
of  oil  nor  by  lowering  the  rate  of  wages  nor  by 
injuring  their  fellow  producers  nor  by  corrupting 
railways  nor  by  bribing  legislators  and  judges, 
then  it  is  true  that  they  are  benefactors  to  the 
community  in  which  they  live  and  to  the  world  at 
large.  Their  millions  are  just  so  much  added 
wealth  in  the  shape  of  improved  land,  valuable 
buildings,  new  railways,  additional  cattle,  horses, 
ships,  money  and  other  personal  property.  All 
this  property  pays  taxes  to  the  government.  It 
cannot  exist  in  the  community  without  adding  to 
the  wealth  of  the  people  at  large.  If  the  owner 
engages  in  trade  he  exchanges  his  property  for 
some  other  property,  to  the  mutual  benefit  of 
buyer  and  seller.  If  he  gives  it  away  in  a  wise 
manner  he  is  a  public  benefactor.  He  cannot 
even  consume  it  without  sharing  it  with  merchants 
and  laborers.  In  short,  the  rich  man  cannot  live 
to  himself  and  must  do  good  unless  he  hides  his 
property  in  the  earth. 

Therefore  it  is  reasonable  to  say  that  in  case  a 
city  government  could  manage  a  street  railway 
80  as  to  secure  as  low  rates  and  as  good  ser- 
vice as  could  be  secured  imder  private  ownership, 


134     MONOPOLIES    PAST   AND    PRESENT. 

even  then  it  would  not  be  justified  in  taking  away 
from  a  i)rivate  owner  a  great  source  of  profit,  un- 
less a  good  part  of  that  profit  could  be  secured  for 
the  city  itself.  It  is  not  enough  to  show  that  the 
city  could  do  as  well  as  a  private  company  in  re- 
gard to  rates  and  efiiciency.  It  must  do  better 
than  that.  If  a  private  company  has  earned  a 
clear  profit  of  a  million  dollars  a  year  and  if  the 
city,  in  taking  up  the  work,  does  the  same  w^ork  at 
the  same  prices  and  paying  the  same  wages,  but 
without  earning  the  extra  profit,  because  of  ex- 
travagant or  inefficient  management,  is  it  not  clear 
that  the  community  is  poorer  than  it  was  before 
by  a  million  dollars  a  year? 

It  is  a  pertinent  question  to  ask  how  much  sav- 
ing to  a  community  would  justify  the  turning 
over  of  a  private  source  of  profit  to  the  public  use. 
If  the  source  of  profit,  when  it  becomes  the  prop- 
erty of  the  public,  begins  to  dry  up  and  become 
scanty,  how  much  reduction  in  price  will  pay  for. 
the  deficient  flow  of  profit?  Advocates  of  munici- 
pal ownership  often  think  that  they  have  done 
enough  when  they  have  shown  that  public  owner- 
ship can  secure  as  low  rates  and  as  good  service 
as  private  ownership,  while  also  providing  a  fair 
interest  on  the  capital  invested  and  fair  wages  to 
employees.  They  have  not  done  enough.  They 
must  also  show  reason  for  the  extinction  of  private 
profit  and  of  opportunities  for  private  advance- 
ment and  social  progress  through  private  effort. 


Mi  XI  CI  PAL  MONOPOLIES.  135 

That  there  are  objections  to  the  system  of 
private  OAvnership  with  public  control  cannot  be 
denied.  It  is  stated  that  private  companies 
charge  higher  rates  and  pay  lower  wages  than  ex- 
ist under  public  ownership.  It  is  hard  to  prove 
this  and  if  it  were  proved,  it  might  be  said  that 
this  state  of  affairs  is  due  to  an  inadequate  con- 
tract. The  franchise  may  have  been  given  away 
or  sold  on  unfavorable  terms.  When  the  old  con- 
tract expires  such  defects  can  be  remedied. 
Ought  we  not  to  have  patience  for  a  few  years  to 
see  whether  we  cannot  do  as  well  by  selling  the 
franchise  at  its  full  value  as  by  undertaking  the 
responsibilities  of  public  0A\Tiership? 

It  is  also  said  that  there  is  more  corruption  un- 
der private  than  under  public  ownership.  There 
is  much  corruption  in  both  cases.  In  the  one  case 
the  city  officials  are  corrupted  by  the  great  com- 
panies, in  the  other  the  city  officials  corrupt  them- 
selves and  whatever  they  touch.  It  is  hard  to  say 
which  form  of  corruption  is  the  worse  and  it  is  not 
easy  to  measure  quantities  of  corruption  for  the 
purpose  of  comparison. 

Again,  it  is  said  that  w-e  ought  not  to  encourage 
the  formation  of  great  fortunes,  such  as  that  of  a 
great  capitalist  of  Chicago,  who  has  made  millions 
out  of  street  railways.  But  it  has  not  been  shown 
that  great  fortunes  are  the  inevitable  outcome  of 
private  ownership  of  municipal  monopolies  under 


136     MONOPOLIES    PAST   AND    PRESENT. 

proper  restrictions.  Even  if  great  fortunes  are 
thus  created,  the  evils  of  the  unequal  distribution 
of  wealth  may  not  be  sufficiently  great  to  justify 
the  abolition  of  private  and  the  establishment  of 
public  ownership.  The  advocates  of  public  owner- 
ship must  make  out  a  very  clear  case  if  they  would 
prove  that  the  time-honored  system  should  be 
abolished  and  a  more  or  less  untried  system  es- 
tablished in  its  place. 

The  advocates  of  municipal  ownership  are  many 
and  enthusiastic.  They  point  to  the  success  of 
many  municipal  enterprises  in  Great  Britain  and 
on  the  continent  of  Europe.  They  say  that  in 
may  cases  lower  rates  and  better  service  have  been 
secured  than  where  private  o^\Tiership  is  still  main- 
tained. They  claim  that  municipal  government 
will  be  purified  by  increasing  its  activities.  The 
people  will  see  the  importance  of  electing  honest 
and  capable  councillors  and  will  insist  on  the  or- 
ganization of  a  complete  and  highly  efficient  civil 
service.  The  spoils  system  will  be  abolished  and 
favoritism  will  be  done  away.  The  profits  of  mu- 
nicipal enterprise  will  be  used  to  defray  the  ordi- 
nary expenses  of  the  city  government  and  by 
and  by  municipal  taxes  will  be  no  more. 

The  opponents  of  municipal  ownership  urge 
that  while  rates  may  be  slightly  lowered,  the  cost 
of  service  will  be  greater  than  under  private  own- 
ership.    It  will  be  found  impossible  to  hurry  the 


MUNICIPAL  MOXOPOLIEf^.  137 

civil  servants.  They  will  not  lose  sleep  over  mu- 
nicii)al  business.  They  will  not  be  careful  to  let 
contracts  on  the  most  favorable  terms.  They  will 
not  be  enterprising  and  progressive.  There  will 
be  too  much  red  tape.  There  will  be  overmuch 
corruption.  Also  it  must  be  remembered  that  the 
initial  expense  of  establishing  municipal  works 
will  be  very  great  and  will  involve  the  creation 
of  a  tremendous  municipal  debt  that  will  not  be 
wiped  out  for  years  to  come.  Especially  where 
there  is  already  a  private  plant  in  existence  will 
the  initial  expense  be  very  great,  for  the  private 
owners  must  be  compensated.  The  city's  chance 
of  profit  will  be  discounted  at  once,  for  the  arbi- 
trator's award  will  give  to  the  private  owners  at 
least  the  market  value  of  their  property,  which 
will  in  all  probability  be  estimated  according  to 
the  market  value  of  the  company's  stock  and 
bonds,  which  will  depend  upon  the  present  and 
prospective  earnings  of  the  plant.  There  may 
also  be  trouble  about  vested  interests  and  many 
lawsuits  may  arise. 

In  any  case  there  will  be  a  great  expense  to  the 
municipal  government  and  no  little  risk.  It  may 
be  that  the  system  of  electric  traction  will  in  a 
few  years  be  entirely  superseded  by  some  other 
method  of  locomotion,  even  as  the  horse  tram- 
ways of  Glasgow  were  rendered  out  of  date  by 
the  electric  tramways   established  in  more   pro- 


138     MONOPOLIES    PAST    AND    PRESENT. 

gressive  cities.  In  such  a  case  their  rails  would 
sell  as  old  iron,  their  cars  as  kindling  wood  and 
the  citj  would  be  at  the  expense  of  introducing 
a  new  system  and  a  new  plant,  at  the  cost  of  a 
new  municipal  debt.  Finally,  the  opponents  of 
municipal  ownership  say  that  we  do  not  want  a 
bureaucracy  such  as  exists  in  Germany,  slow,  un- 
progressive,  arrogant,  but  that  wo  had  better,  as 
long  as  possible,  carry  on  our  industry  upon  those 
American  methods  which  have  placed  the  United 
States  in  the  van  of  industrial  progress. 

From  the  war  of  theories  we  turn  to  the  war 
of  statistics.  Without  quoting  figures  it  may  be 
said  that  statistics  apparently  favor  the  municipal 
ownership  of  water-works  and  gas,  especially  in 
Great  Britain.  The  success  of  municipal  tram- 
ways is  doubtful  and  even  where  considerable  suc- 
cess has  been  attained,  as  in  Glasgow  and  Shef- 
field, it  is  highly  probable  that  the  municipal  au- 
thorities would  have  done  better  to  have  sold  the 
franchises  to  enterprising  American  tramway  com- 
panies. British  experience  is  by  no  means  con- 
clusive for  the  United  States,  and  municipal  ex- 
periments in  the  United  States  have  been  too  few 
as  yet  to  prove  or  disprove  the  desirability  of 
municipal  ovniership,  except  in  special  cases. 

Methods  of  accounting  are  so  various  and  sta- 
tistics are  often  so  misleading  that  it  is  extremely 
difficult  to  arrive  at  any  satisfactory  or  definite 


MUNICIPAL  MONOPOLIES.  139 

conclusions  as  to  the  respective  merits  of  public 
'and  private  o^\Tiersliip.  Perhaps  we  cannot  do 
better  than  to  quote  the  conclusions  of  two  investi- 
gators, A,  II.  Sinclair,  writing  in  1891,  and  W. 
M.  Daniels  in  1899.  ]\[r.  Sinclair's  conclusiong 
are  as  follows: 

1.  "  That  water  supply  is  an  undertaking  in 
which  municipal  management  has  been  eminently 
successful,  both  in  America  and  in  Europe,  and 
in  both  has  yielded  large  financial  returns,  which 
have  been  used  to  lighten  the  burden  of  general 
taxation." 

2.  "  That  while  the  municipal  direction  of 
street-railways  has  been  attempted  but  seldom  in 
Europe  and  never  in  America,  street-car  service 
is  a  source  whence  large  revenues  might  be  de- 
rived by  great  and  growing  cities,  revenues  which 
may  be  obtained  either  through  the  power  of  con- 
trol rendered  necessary  by  their  public  character, 
or  by  their  direct  operation  on  the  part  of  the 
city." 

3.  "  That  the  gas  industry,  where  undertaken 
by  the  municipal  authorities,  has  been  as  success- 
ful as  when  in  private  hands,  and  has,  in  addition, 
provided  large  sums  for  the  local  treasury." 

4.  "  That  electric  lighting  is  still  in  too  unset- 
tled a  stage  for  us  to  be  able  to  draw  definite  con- 
clusions regarding  it.  There  are  indications  that 
under  ordinary  conditions  it  would  pay  a  town 
better  to  lease  the  franchise." 


140     MONOPOLIES   PAST   AND    PRESENT.       . 

5.  "  That  of  telephone  service  so  little  is  yet 
known  that  though  its  peculiarities  call  for  more 
than  the  ordinary  amount  of  public  control,  it 
would  be  unwise  to  attempt  municipal  manage- 
ment." 

Professor  Daniels  draws  the  following  conclu- 
sions: 

1.  "  The  price  charged  by  private  companies 
for  the  supply  of  water  exceeds  by  twenty-five  to 
forty-three  per  cent,  the  price  charged  by  munici- 
pal water-works." 

2.  "  The  cost  of  the  water  supply  by  munici- 
palities probably  exceeds  the  cost  incurred  by  pri- 
vate companies,  though  how  far  the  increased  cost 
augments  general  taxes  it  is  difficult  to  say." 

3.  "  While  the  price  of  gas  in  England  under 
both  systems  is  markedly  less  than  the  price  of 
gas  under  either  system  in  the  United  States,  the 
rate  of  reduction  in  gas  prices  in  the  United  States 
since  1870  seems  to  have  been  more  rapid  than 
in  England." 

4.  "  The  cost  of  producing  gas  has  probably 
been  less  under  private  than  under  public  manage- 
ment." 

5.  "  The  price  charged  for  gas  by  public  com- 
panies in  England  appears  to  be  less  by  seven  or 
eight  per  cent,  than  the  charge  made  by  private 
companies,  but  no  such  general  assertion  can  be 
made  with,  respect  to  the  United  States." 


MUNICIPAL  MONOPOLIES.  141 

6.  "  Public  electric  light  plants  in  this  country 
cannot  be  said  generally  to  furnish  electricity  at 
a  lower  cost  or  price  than  private  companies.  The 
evidence  rather  tends  to  show  that  the  advantage 
lies  with  private  companies." 

7.  "  Local  transportation  has  been  undertaken 
by  several  British  municipalities  with  varying  suc- 
cess. In  this  country  it  is  as  yet  untried.  When 
all  circumstances  are  taken  into  consideration,  it 
would  appear  that  our  transportation  service  is 
not  only  immeasurably  more  efficient  than  the 
British  tramway  service,  but  that  the  charges  for 
distance  traversed  are  really  less  in  the  United 
States  than  upon  the  most  successful  of  munici- 
pal lines  in  Great  Britain," 

"  The  generalizations  which  may  be  dra"\vn  from 
this  summary  are  that  cost  is  almost  certain  to 
be  less  under  a  private  company  than  under  city 
management;  that  the  price  charged  the  consumer 
may  be  less  under  municipal  public  works,  but 
that  there  is  no  assurance  that  this  ^vill  be  the 
case;  that  efficiency  of  service  is  likely  to  be 
greater  under  a  private  system,  where  improve- 
ments are  rapidly  introduced,  than  under  a  public 
system  where  they  are  slowly  adopted.  When  to 
these  tentative  conclusions  we  add  that  the  largest 
experiment  in  municipal  industries  in  the  United 
States,  the  Philadelphia  gas-works,  after  an  experi- 
ence of  over  half  a  century  has  proved  an  unojues- 
tioned  financial  failure,  the  presumption  against 


142     MONOPOLIES   PAST   AND    PRESENT. 

direct  municipal  service  in  this  country  at  the 
present  time  gathers  great  strength.  Political 
conditions  being  what  they  are,  it  seems  fairly 
safe  to  assert  that  the  city  taxpayer  would  prob- 
ably be  hit  harder  by  public  waste  and  public  steal- 
ing than  by  private  profits.  Obviously  the  con- 
clusion drawn  is  favorable  to  the  franchise  system 
rather  than  to  the  system  of  municipal  industry." 

In  conclusion  we  may  say  that  private  owner- 
ship and  management  should  not  be  abolished 
without  good  reason.  The  quoting  of  successful 
experiments  in  Great  Britain,  or  even  in  the 
United  States,  cannot  be  considered  in  itself  suffi- 
cient to  prove  the  advisability  of  undertaking  simi- 
lar experiments  in  other  places.  Each  case  ought 
to  be  decided  on  its  merits  and  a  careful  considera- 
tion of  local  conditions  must  be  made  if  the  mu- 
nicipality is  not  to  take  a  leap  in  the  dark. 

Whether  we  are  to  have  municipal  ovniership 
or  private  ownership  with  municipal  control  it 
will  be  necessary  to  secure  good  municipal  govern- 
ment. Municipal  politics  must  be  separated  from 
state  and  federal  politics.  Respectable  and  repre- 
sentative citizens  must  be  willing  to  accept  office. 
Civic  patriotism  must  be  developed.  Certain 
changes  in  the  form  of  city  government  will  prob- 
ably be  needed.  When  the  people  feel  the  need 
of  good  government  they  will  be  able  to  secure  it 
and  the  problem  of  municipal  monopolies  wall  be 
insoluble  no  more. 


VII. 
RAILWAYS    AS    MONOPOLIES. 


C.  F.   Adams,   "  Railroads  and  Railroad  Questions,"   New 

York,  1878. 
A.    T.    Hadley,    "  Railroad    Transportation,"    New    York, 

1885. 
J.    F.   Hudson,   "  The   Railways    and   the   Republic,"    New 

York,  1886. 
A.  B.  Stickney,  "  The  Railway  Problem,"  St.  Paul,  1891. 
J.  M.  BoNHAM,  "  Railway  Secrecy  and  Trusts,"  New  York, 

1890. 
James  Hole,  "  National  Railways,"  London,  1893. 
G.  H.  Lewis,  "  National  Consolidation  of  Railways  in  the 

United  States,"  New  York,  1893. 
F.  H.  Dixon,  "  State  Railroad  Control,"  New  York,  1896. 
Clement    Edwards,    "  Railway   Nationalization,"    London, 

1898. 
Frank    Hendrick,    "  Railway    Control    by    Commission," 

New  York,   1900. 
Reports    of    the    Interstate    Commerce    Commission,    1887- 

1899. 


144 


CHAPTEK  VII. 

RAILWAYS   AS  MONOPOLIES. 

The  opening  of  the  Stockton  and  Darlington 
Railway  on  September  27,  1825,  marks  the  be- 
ginning of  a  new  period  in  industrial  history.  Xot 
long  thereafter  steam  railways  were  established 
in  almost  every  part  of  the  civilized  w^orld. 

The  first  steam  railway  in  the  United  States  was 
the  Baltimore  and  Ohio,  chartered  in  1827  and 
begun  in  the  following  year.  Since  that  time, 
but  especially  since  1850  the  growth  of  railways 
in  the  United  States  has  been  enormous  and  won- 
derful. The  following  table  shows  this  growth  by 
periods  since  1830: 

Tears.  Miles  built. 

1830-40 2,000 

1840-50 5,000 

1850-60 20,000 

1860-70 16,000 

1870-75 27,000 

1875-80 14,000 

1880-85 39,000 

1885-90 40,000 

1890-95 17,000 

1895-99 9,000 

Total 189,000 

10 


146  MONOPOLIES   PAST   AND    PRESENT. 

The  rapid  extension  of  the  railway  system  has 
rendered  possible  the  rapid  settlement  of  the 
United  States  and  the  consequent  increase  in  popu- 
lation. "Without  the  railways^  settlement  would 
have  proceeded  but  slowdy,  except  in  the  neighbor- 
hood of  the  water  courses.  Where  facilities  for 
transportation  are  poor  the  people  are  poor  and 
in  general  few  in  number.  They  pay  high  prices 
for  wdiat  they  import  and  receive  low  prices  for 
what  they  export.  Exchange  is  hampered.  The 
consumer  cannot  buy  and  the  producer  cannot  sell, 
for  the  expenses  of  transportation  are  too  great. 
This  condition  of  affairs  is  seen  in  many  a  back- 
woods settlement  of  the  present  day.  The  farmer 
receives  twenty-five  cents  for  a  bushel  of  wheat, 
five  cents  for  a  dozen  of  eggs,  one  dollar  for  a 
cord  of  wood  and  five  dollars  for  a  month's  board. 
He  pays  fifteen  cents  a  pound  for  sugar,  twenty 
dollars  for  a  common  ready-made  suit  of  clothes 
and  similar  prices  for  plows,  harness,  shoes,  sewing- 
machines  and  all  other  freight-paying  articles. 

When  a  railway  is  built  the  cost  of  transporta- 
tion is  enormously  reduced.  The  saving  thereby 
effected  accrues  largely  to  the  farmer.  He  can 
now  sell  his  wheat  for  fifty  cents,  his  eggs  for  ten 
cents,  his  cord  wood  for  two  dollars  and  the  sum- 
mer boarder  is  glad  to  live  on  the  fat  of  the  land 
at  ten  or  fifteen  dollars  a  month.  At  the  same 
time  the  prices  of  imported  articles  are  greatly 


RAILWAYS  AS  MONOPOLIES.  147 

reduced  and  the  fanner  can  therefore  consume 
more  of  them.  The  final  result  is  a  great  increase 
of  wealth  in  both  to^vn  and  country,  with 
a  corresponding  increase  in  population  and  in 
civilization. 

The  railway  is  a  labor-saving  machine.  The 
amount  of  labor  saved  can  be  measured  by  the 
work  done  by  the  machine.  David  A.  Wells  has 
thus  expressed  it:  "  In  the  year  1887  the  freight 
transportation  by  the  railroads  of  the  United 
States  was  equivalent  to  60,001,069,996  tons  car- 
ried one  mile;  while  the  population  for  that  year 
was  somewhat  in  excess  of  60,000,000.  The  rail- 
road freight  service  of  the  United  States  for  1887 
was  therefore  equivalent  to  carrying  a  thousand 
tons  one  mile  for  every  person,  or  every  ton  a 
thousand  miles.  The  average  cost  of  this  service 
was  about  ten  dollars  per  annum  for  every  person. 
But  if  it  had  been  entirely  performed  by  horse- 
power even  under  the  most  favorable  of  old-time 
conditions,  its  cost  would  have  been  about  two 
hundred  dollars  to  each  inhabitant,  which  in  turn 
would  represent  an  expenditure  greater  than  the 
entire  value  of  the  annual  products  of  the  coun- 
try/' The  railways  of  the  United  States  have 
been  built  at  great  cost,  but  they  have  repaid  their 
cost  many  times  over. 

The  railways  of  the  United  States  have  been 
built  by  capitalists,  assisted  by  the  people  as  rep- 


148     MOXOPOLIES    PAST   AND    PRESENT. 

resented  in  federal,  state  and  nmnicipal  govern- 
ments. Great  quantities  of  public  land  have  been 
given  to  raihvay  companies.  The  Northern  Pa- 
cific received  48,000,000  acres.  The  Union  Pacific 
and  the  Central  Pacific  received  $25,000  a  mile 
and  over  30,000,000  acres  of  land.  In  all,  the 
United  States  government  has  given  211,890,489 
acres  of  land  for  the  encouragement  of  railway 
building.  Other  inducements  have  been  offered 
and  accepted,  such  as  gifts  of  municipal  bonds, 
cash  bonuses,  rights  of  way,  exemptions  from  taxa- 
tion. As  James  G.  Blaine  has  said:  "If  all  the 
advances  to  railway  companies,  together  with  all 
the  outright  gifts  by  towns,  cities,  counties,  states 
and  the  nation,  be  added  together,  their  money 
value  would  not  fall  short  of  $1,000,000,000." 
Apart  from  these  aids,  the  railways  have  been  built 
by  funds  supplied  by  stockholders  and  bondhold- 
ers, especially  the  latter. 

It  is  very  difiicult  to  estimate  the  amount  of 
money  spent  by  the  investors  in  the  construction 
of  the  roads.  The  railways  of  the  United  States^ 
mth  an  aggregate  mileage  in  1899  of  189,294.06 
miles,  are  capitalized  at  $11,033,954,898,  of  which 
$5,515,011,720,  is  held  by  the  stockholders  and 
$5,518,943,172  by  the  bondholders.  It  is  highly 
probable  that  the  total  cost  to  the  original  invest- 
ors, apart  from  loss  of  interest,  has  not  been 
greater  than  the  face  value  of  the  bonds  and  that 


RAILWAYS  AS  MONOPOLIES.  149 

the  cost  of  construction  has  been  even  less  than 
that. 

The  construction  of  railways  in  the  United 
States  has  not  as  a  rule  proceeded  according  to 
any  definite  or  prearranged  plan,  such  as  has  been 
followed  in  France,  where  the  railways  have  been 
built  under  the  supervision  and  control  of  the  gov- 
ernment. Railways  have  often  been  built  in  ad- 
vance of  settlement  and  not  infrequently,  as  in 
the  case  of  the  trans-continental  lines,  through 
great  tracts  of  country  unsuited  to  settlement. 
There  has  been  much  duplication  of  lines,  not  to 
speak  of  triplication  and  worse.  It  is  not  uncom- 
mon 1-)  see  parallel  lines  of  rival  companies  run- 
ning side  by  side  for  many  miles,  doing  work  that 
might  as  well  or  better  be  done  by  a  single  line. 
"  Between  Chicago  and  Cairo,  a  distance  of  three 
hundred  and  sixty-seven  miles,  there  are  twenty- 
two  railway  companies  whose  lines  cross  that  of 
the  Illinois  Central  —  eighteen  of  the  twenty-two 
have  passed  into  the  hands  of  a  receiver  since 
1874." 

The  construction  of  these  parallel  and  superflu- 
ous lines  has  been  due  to  a  mania  for  railway  build- 
ing or  to  the  necessities  of  rival  companies  or 
to  a  belief  in  the  benefits  of  competition  or  to 
government  aid  or  to  all  of  these  causes  combined. 
These  periodical  manias  are  encouraged  by  pro- 
moters of  companies  who  understand  human  na- 


150  2[OyOPOLIES    PA.ST   AND    PRESENT. 

ture  and  who  know  that  great  profits  are  to  be 
made  by  construction  companies,  whether  the 
shareholders  of  the  railway  company  ever  receive 
dividends  or  not.  Yet  these  shareholders,  or  at 
least  an  inside  ring  of  managers,  frequently  enjoy 
a  dual  existence.  In  their  capacity  as  a  construc- 
tion company  they  receive  ten  or  twenty  or  forty 
or  sixty  per  cent,  on  their  capital  outlay.  In  their 
capacity  as  shareholders  of  the  railway  company 
they  hold  up  empty  hands  to  show  that  they  have 
received  no  dividends  on  stock  for  which  they  paid 
perhaps  less  than  ten  cents  on  the  dollar.  It  is  a 
curious  fact  that  managers  of  roads  that  never 
pay  dividends  and  ultimately  fall  into  the  hands 
of  receivers  often  acquire  immense  fortunes 
through  their  connection  with  the  bankrupt  roads. 
The  opportunities  for  profit  through  construction 
companies  and  land  companies  and  through  specu- 
lation in  the  stock  exchange  are  so  gi'eat  that  more 
than  heroic  virtue  would  be  required  to  withstand 
the  temptations. 

As  a  result  of  excessive  railway  building  it  has 
come  to  pass  that  the  railways  of  the  United  States 
have  not,  as  a  rule,  paid  an  adequate  interest  on 
money  invested.  TVIiile  inside  rings  have  made 
enormous  gains,  the  "  lambs  "  have  been  fleeced 
and  thousands  of  innocent  investors,  at  home  and 
abroad,  have  rued  the  day  they  bought  American 
railway  "  securities." 


RAILWAYS  AS  MONOPOLIES.  151 

During  the  year  ending  June  30,  1899,  59  per 
cent,  of  all  railway  stocks  in  the  United  States 
paid  no  dividends  and  the  remaining  41  per  cent, 
paid  an  average  dividend  of  4.96  per  cent.  In 
group  IX,  in  the  classification  of  the  Inter-State 
Commerce  Commission,  which  includes  Texas, 
Louisiana  and  part  of  New  Mexico,  91  per  cent, 
of  the  railway  stocks  paid  no  dividends.  The  in- 
vestors in  bonds  have  been  more  fortunate,  for 
the  bonded  indebtedness  is  a  first  lien  on  the  prop- 
erty of  a  railway  company  and  if  there  is  any  net 
income  at  all,  the  bondholders'  interest  must  be 
paid  before  the  stockholders  can  receive  anything. 
During  the  same  year  10.45  per  cent,  of  the  rail- 
way bonds  paid  no  interest,  30.32  per  cent,  paid 
from  one  to  four  per  cent.,  54.47  per  cent,  paid 
from  four  to  seven  per  cent.,  and  4.Y6  per  cent, 
paid  seven  per  cent,  and  over. 

It  is  not  claimed,  therefore,  that  the  railway 
companies,  one  with  another  receive  excessive  re- 
turns upon  the  capital  invested.  ISTeither  can  it 
be  justly  claimed  that  the  rates  are  too  high.  In 
the  year  1868  the  average  freight  rate  per  ton- 
mile  was  2.453  cents,  a  low  rate  for  that  time. 
In  the  year  1899  the  average  published  rate  was 
.724  cent  per  ton-mile,  a  very  low  rate  compared 
with  railway  rates  in  other  parts  of  the  world  and 
a  wonderful  rate  when  compared  with  rates  of 
transportation  by  horses  or  oxen  in  the  early  part 


152  MONOPOLIES    FAST   AND    PRESENT. 

of  the  ninetecntli  century.  The  passenger  rates 
are  also  low,  being  on  the  average  1.925  cents  per 
passenger-mile,  a  trifle  higher  than  the  third-class 
rates  in  England  and  on  the  continent  of  Enrope, 
but  lower  than  the  second-class  rates  in  those 
countries. 

The  financial  condition  of  railway  companies  in 
the  United  States  is  steadily  improving.  In  1896 
there  were  151  roads  in  the  hands  of  receivers, 
representing  a  total  mileage  of  30,475  miles.  In 
1899  there  were  but  71  roads  in  this  condition, 
with  a  mileage  of  only  9,853  miles.  The  traffic 
has  greatly  increased  during  the  past  few  years. 
The  rates  of  interest  on  both  stocks  and  bonds 
are  rising  slowly  but  surely.  The  time  is  probably 
not  far  distant  when  the  entire  capital  of  $11,000,- 
000,000  will  be  paying  a  fair  rate  of  interest. 

Notwithstanding  the  fact  that  average  rates  are 
low  and  average  returns  to  capital  very  moderate, 
it  must  still  be  maintained  that  railway  corpora- 
tions are  monopolists.  Where  but  one  railway 
exists  the  monopoly  is  complete.  There  is  no 
monopoly  of  transportation  by  water  nor  by  horse- 
carriage,  ox-wagon,  hand-cart,  or  flying-machine. 
There  is  no  monopoly  of  transportation  in  general 
but  only  of  railway  transportation.  If  any  mer- 
chant wishes  to  ship  his  goods  by  any  means  of 
conveyance  other  than  the  railway,  he  is  at  per- 
fect liberty  so  to  do.     There  is  no  physical  com- 


RAILWAYS  AS  MONOPOLIES.  153 

pulsion,  no  outward  interference  witli  personal 
liberty,  but  there  is  compulsion  and  interference 
of  another  kind.  If  the  merchant  ^\dll  not  ship 
his  goods  by  the  railway  and  at  railway  rates,  in 
so  far  as  his  business  is  concerned  he  must  pre- 
pare to  die  and  be  buried  and  to  see  another  reign 
in  his  stead.  lie  is  tlierefore  compelled  to  use 
the  railway  and  is  to  that  extent  under  the  power 
of  the  railway  company. 

Before  the  railway  was  built  there  was  perhaps 
competition  between  the  owners  of  hay-carts  and 
stage-coaches  and  there  was  no  monopoly  of  trans- 
portation of  freight  or  passengers.  When  the 
railway  was  built  the  plane  of  competition  Avas 
lowered  until  hay-carts  and  stage-coaches  could 
no  longer  compete  and  tlierefore  left  the  field. 
At  the  old  rates  they  could  have  continued  to 
compete  but  at  the  new  and  lower  rates  they  could 
not  compete.  The  railway  therefore  caused  rates 
to  fall  and  at  the  same  time  established  a  mo- 
nopoly. 

The  extent  and  power  of  the  railway's  monop- 
oly is  measured  by  its  control  over  rates.  The 
highest  rate  that  the  railway  can  charge  is  a  little 
less  than  the  lowest  possible  rate  by  the  old  form 
of  transportation.  The  lowest  rate  it  can  afford 
to  make  is  usually  measured  by  the  income  which 
it  needs  in  order  to  continue  to  pay  its  running 
expenses.     Between  these  two  points  the  railway 


154:  MONOPOLIES   PAST   AND    PRESENT. 

has  control  of  rates.  The  maximum  rate  would 
be  the  actual  rate  if  it  were  the  rate  most  advan- 
tageous to  the  railway,  but  this  is  seldom  the  case. 
It  is  usually  more  profitable  to  haul  a  large  amount 
of  traffic  at  a  fairly  low  rate  than  a  small  amount 
at  a  very  high  rate.  The  actual  rate  is  therefore 
fixed  at  the  point  of  greatest  net  returns  on  the 
principle  of  "  charging  what  the  traffic  vtHI  bear." 
It  may  be  that  the  railway  company  A\'ill  see  fit 
to  charge  a  rate  even  lower  than  this  in  order  to 
discourage  the  building  of  a  rival  road  or  to  pro- 
pitiate the  public  or  to  attain  some  other  end. 
The  fact  that  the  railway  company  does  not  al- 
ways choose  to  exercise  the  powers  of  a  monopo- 
list does  not  deprive  it  of  its  monopolistic  char- 
acter The  significant  fact  is  that  within  certain 
limits  it  can  raise  and  lower  its  rates. 

When  a  rival  road  is  built  the  conditions  are 
not  altered  except  at  certain  places  called  com- 
petitive points.  It  seldom  happens  that  rival  roads 
run  side  by  side  for  any  great  distance.  There 
are  therefore  along  the  line  of  every  railwa}^  many 
places  that  do  not  enjoy  the  benefits  of  competi- 
tion but  are  many  miles  from  any  other  road. 
At  these  local  points  the  railway  still  enjoys  a 
monopoly  and  still  exercises  control  over  rates, 
according  to  the  principle  and  rule  of  charging 
what  the  traffi-c  will  bear  or  what  will  produce  the 
greatest   net   returns.       Inasmuch   as   the   great 


RAILWAYS  AS  MONOPOLIES.  155 

majority  of  small  towns  and  country  districts  in 
the  United  States  are  served  by  only  one  railway, 
it  is  right  to  say  that  the  railways  still  possess 
and  exercise  the  power  of  monopoly  to  a  very 
great  extent. 

It  is  true  that  competition  is  not  entirely  ex- 
cluded in  regard  to  local  points.  Wheat  from  ten 
thousand  local  points  proceeds  to  the  same  market 
at  Chicago  or  jSTew^  York  and  must  be  sold  at  the 
same  price  in  these  markets.  If  now  a  railway 
charge  too  high  a  rate,  the  fanners  of  its  district 
will  not  be  able  to  compete  with  the  farmers  from 
districts  where  the  rates  are  lower  and  will  there- 
fore cease  to  ship  wheat,  to  the  damage  of  the 
local  traffic  of  the  too  grasping  railway.  This 
w^ould  be  charging  more  than  the  traffic  could  bear 
and  would  destroy  the  traffic  and  the  railway  as 
well.  Competition  such  as  this  w^ould  prevent  the 
railway  from  charging  more  than  the  traffic  could 
bear,  but  would  not  prevent  it  from  charging  as 
much  as  the  traffic  could  bear  or  as  much  as  the 
farmers  could  possibly  stand  without  going  out  of 
their  business  and  more  than  would  be  charged  if 
competition  were  possible.  When  a  rival  line  is 
built  between  any  two  places,  those  places  are 
called  competitive  points.  Wliatever  the  cause  of 
the  construction  of  the  new  line,  the  people  re- 
joice in  the  hope  of  lively  competition  and  lower 
rates.    Their  hopes  are  often  realized  and  as  often 


156  MO^SOPOLIEH    PAST    AND    PRESENT. 

shattered.  For  a  time,  competition  holds  sway 
and  rates  fall.  They  may  fall  very  low.  It  is  hard 
to  set  a  limit  below  which  they  cannot  fall.  They 
have  been  known  to  fall  to  zero.  It  is  not  possible 
for  rates  to  remain  at  zero  for  a  long  time,  unless 
the  competing  railways  have  a  great  reserve  of 
capital.  There  is,  however,  a  point  at  which  they 
can  remain  for  an  indefinite  period  of  time,  with- 
out drawing  on  the  reserve.  This  is  the  point 
fixed  by  the  running  expenses  of  the  railway. 
While  rates  are  sufficient  to  pay  the  running  ex- 
penses of  a  road,  including  salaries,  repairs,  and 
interest  on  bonds,  the  road  ^vill  continue  to  run, 
although  the  stockholders  m.ay  receive  no  divi- 
dends. 

In  the  case  of  an  ordinary  business,  where  there 
is  no  great  amount  of  fixed  capital,  the  business 
will  not  long  continue  to  exist  while  earning  no 
interest  on  the  capital  employed.  The  capital  will, 
if  possible,  be  withdrawni  and  invested  elsewhere. 
In  the  case  of  a  railway  this  seldom,  if  ever,  takes 
place.  A  railway,  once  built,  remains  a  railway 
and  continues  in  operation.  If  rates  are  not  high 
enough  to  pay  interest  on  the  capital  invested 
they  may  remain  low  during  many  years,  pro- 
vided that  they  are  sufiicient  to  cover  running  ex- 
penses. There  is  usually  a  possibility  and  even  a 
probability  that  the  road  will  in  time  pay  some- 
thing to  its  owners,  and  since  the  owners  cannot 


TfATLWAT!^  AS  MONOPOLIES.  157 

sell  an  unprofitable  road,  they  see  no  harm  in 
keeping  it  running  and  in  good  condition,  waiting 
for  better  times. 

Therefore  when  competition  exists  between  two 
or  more  railways,  it  is  apt  to  be  very  fierce  and 
rates  are  apt  to  sink  far  below  the  point  of 
"  greatest  net  returns  "  and  far  below  the  ''  cost  of 
production  "  and  at  times  below  the  cost  of  run- 
ning the  road  and  even  doA\-n  to  nothing  and  even 
below  nothing,  for  railways  have  been  known  to 
pay  passengers  for  allowing  themselves  to  be 
"  transported." 

These  wars  of  rates  are  very  harmful  to  the 
competing  roads.  This  is  cut-throat  competition. 
This  is  war  to  the  knife.  When  the  war  is  be- 
tween a  financially  strong  road  and  a  financially 
weak  one,  the  weak  road  is  generally  killed  and 
afterAvard  eaten  by  its  victorious  enemy.  Thus 
peace  is  restored  and  monopoly  reigns  again. 
When  two  great  and  powerful  companies  go  to 
war,  they  fight  like  Roland  and  Oliver,  until  both 
are  exhausted  and  neither  can  inflict  a  fatal  wound. 
Then,  or  perhaps  before  the  point  of  complete  ex- 
haustion is  reached,  they  ask  one  another  the  cause 
of  so  disastrous  a  conflict.  Thereupon  they  dis- 
cover that  their  interests  are  to  a  large  extent 
identical,  that  they  ought  not  to  have  made  war 
upon  one  another  but  upon  the  public  and  that 
they  ought  always  to  have  been  the  best  of  friends. 


158  MONOPOLIES   PAST   AND    PRESENT. 

They  agree  to  make  peace.  They  have  suffered 
in  the  conflict.  They  agree  to  indemnify  them- 
selves by  raising  rates.  They  try  to  raise  rates 
to  a  point  equal  to  that  maintained  before  the 
war  or  even  to  a  higher  point  than  that.  This 
is  not  always  possible  but  rates  are  fixed  at  as  high 
a  standard  as  can  safely  be  maintained.  Peace 
and  monopoly  are  restored. 

There  are  different  kinds  of  agreements.  Some- 
times the  companies  agree  to  maintain  rates. 
Sometimes  they  agree  to  divide  the  field  or  to 
divide  the  earnings  and  railway  pools  are  formed 
of  one  kind  and  another  but  all  based  upon  the 
same  principle  of  securing  sufficient  traffic  at  suffi- 
ciently high  rates.  At  times  this  ideal  cannot  be 
realized  and  it  is  found  that  the  traffic  is  not  suffi- 
cient at  any  rates  to  maintain  both  roads  in  a 
prosperous  condition.  Both  roads  still  continue 
to  exist,  where  a  single  road  might  have  earned 
comfortable  dividends. 

Although  the  railway  combination  is  a  monopo- 
list in  its  essential  nature,  the  monopoly  is  modi- 
fied by  a  certain  amount  of  competition.  Even 
after  combination  there  is  a  certain  amount  of 
competition  between  the  railways.  There  are 
some  routes  more  direct  than  others  or  more 
agreeable  to  passengers  because  of  fine  scenery 
or  good  connections.  Some  roads  are  preferred 
to  others  because  of  better  cars,  more  convenient 


RAILWAYS  AS  MONOPOLIES.  159 

time-schedules,  more  affable  conductors.  Some 
have  more  enterprising  managers  and  more  active 
agents  than  their  rivals  can  procure.  In  all  these 
and  in  other  ways,  railways  compete  with  one  an- 
other after  they  have  made  agreements  concerning 
rates. 

There  is  still  another  kind  of  competition  that 
is  regarded  as  a  mortal  sin  in  the  eyes  of  the 
f  ramers  of  agreements  but '  which  is  constantly 
committed  by  these  very  persons  in  their  capacity 
as  agents  of  the  particular  roads  to  which  they  be- 
long. It  is  the  sin  of  cutting  rates.  It  is  a  se- 
cret sin.  It  is  due  to  special  and  extraordinary 
temptation.  The  temptation  is  greatest  when 
rates  are  highest.  The  penalty  is  severe.  The 
persistent  offender  is  cast  out  of  the  combination. 
The  surviving  and  virtuous  members  wage  war 
against  him  until  he  is  destroyed  or  comes  to  see 
the  error  of  his  ways.  Secret  rate-cutting  is  the 
chief  source  of  weakness  and  instability  in  railway 
agreements  and  the  chief  cause  of  their  downfall. 
A  war  of  rates  is  the  usual  result,  followed  by 
another  agreement,  combination  or  consolidation. 

It  is  to  the  interest  of  the  combination  to  estab- 
lish a  moderately  low  rate  in  order  to  lessen  the 
inducement  to  rate-cutting.  The  permanence  of 
a  combination  is  best  secured  by  low  rates.  The 
higher  the  rate,  the  more  unstable  the  combina- 
tion.   So  unstable  and  so  unsatisfactory  are  the  or- 


160  MONOPOLIES   PAST   AND    PRESENT. 

dinary  railway  combinations  or  agreements,  that 
there  is  a  constant  tendency  toward  the  consolida- 
tion of  rival  roads  under  a  single  management. 

In  the  year  1847,  there  were  in  the  United 
States,  5,000  miles  of  railway  owned  by  300  inde- 
pendent companies,  giving  an  average  of  less  than 
20  miles  per  company.  In  the  year  1872  there 
were  55,000  miles,  of  which  13,000  miles  were 
owned  by  12  companies.  In  the  year  1898  there 
were  836  independent  companies  owning  or  oper- 
ating 186,396.32  miles  of  railway,  of  which  about 
105,000  miles  were  operated  by  44  companies,  with 
an  average  of  2,400  miles  per  company.  Also 
many  of  the  so-called  independent  roads  are  not 
independent  at  all,  but  are  under  the  control  of 
one  or  more  of  the  great  railway  companies. 

The  process  of  consolidation  renders  competition 
impossible  in  many  parts  of  the  country  and  in 
those  parts  railway  rates  are  regulated  according 
to  the  monopolistic  principle  of  charging  what  the 
traffic  wall  bear.  Where  there  are  two  or  more 
great  companies,  competition,  when  it  takes  place, 
is  apt  to  be  very  fierce.  The  advantages  of  agree- 
ment are  then  clearly  seen.  Agreement  is  there- 
fore the  rule  and  competition  the  exception  and 
the  tendency  toward  further  consolidation  con- 
tinues to  operate.  In  Canada,  practically  the  total 
railway  mileage  is  operated  by  two  companies  and 
the  time  may  not  be  far  distant  when  a  similar  con- 
dition will  prevail  in  the  United  States. 


RAILWAYS  A8  MONOPOLIES.  161 

It  is  probably  correct  to  saj  that  throughout  the 
United  States  the  railway  companies  exercise  the 
powers  of  monopoly  to  a  very  large  extent,  during 
most  of  the  time,  at  practically  all  the  railway  sta- 
tions, local  and  competitive.  At  local  points  there 
is  no  competition.  At  competitive  points  there  is 
agreement  between  the  roads.  In  both  cases  rates 
are  controlled  by  the  railways.  Local  rates  are 
as  a  rule  high,  because  it  is  thought  that  the  traffic 
can  bear  high  rates  and  because  the  railway  does 
not  think  it  worth  while  to  carry  the  small  traffic 
at  low  rates.  Competitive  rates  are  low,  chiefly 
because  it  pays  better  to  carry  a  large  quantity 
of  goods  at  low  rates  than  a  small  quantity  at  high 
rates.  If  the  traffic  could  bear  high  rates,  the  rates 
would  be  raised  by  agreement  between  the  roads. 

The  railways  of  the  United  States  do  not,  as  a 
rule,  pay  adequate  dividends  on  the  capital  in- 
vested, partly  because  too  many  roads  have  been 
built,  too  much  capital  expended,  but  also,  and 
perhaps  chiefly  because  many  roads,  like  the 
Atchison,  Topeka  and  Santa  Fe,  have  been  built 
with  money  derived  from  the  sale  of  bonds  and 
not  from  the  sale  of  stock.  The  stock  has  often 
been  sold  at  low  figures  or  even  given  away.  It  is 
largely  watered.  The  rates  that  the  traffic  can 
bear  are  not  sufficient  to  pay  running  expenses,  in- 
terest on  bonds  and  after  that  to  leave  any  great 

surplus  to  be  distributed  among  the  stockholders. 
11 


162    MONOPOLIES   PAST   AND   PRESENT. 

As  population  increases,  especially  the  population 
of  the  Western  States,  traffic  will  proportionately 
increase  and  will  yield  increased  dividends  even 
without  any  increase  in  rates. 

At  the  present  time  it  is  not  correct  to  say  that 
average  railway  rates  in  the  United  States  are  too 
high.  If  it  is  true  that  the  railways  have  the 
powers  of  monopoly,  it  is  equally  true  that  up  to 
the  present  time,  and  as  a  rule,  they  have  not  exer- 
cised them  in  the  w^ay  of  charging  exorbitant  aver- 
age rates.  What  the  railways  may  do  in  the 
future,  when  more  gigantic  consolidations  will  be 
formed  and  the  traffic  will  be  sufficient  to  bear 
high  rates,  can  only  be  a  subject  for  conjecture. 
As  for  the  present,  it  is  tolerably  certain  that  if 
all  the  railways  were  owned  by  the  government 
and  managed  in  the  most  efficient  way  known  to 
civil  servants,  average  railway  rates  would  be  no 
lower  than  they  are  now  and  would  probably  be 
somewhat  higher. 

The  railways  are  not  accused  of  having  com- 
pelled the  people  as  a  whole  to  bear  too  heavy  a 
burden  but  they  are  charged  mth  having  com- 
pelled some  of  the  people  to  bear  more  than  their 
share  in  order  that  others  may  bear  less.  The 
distribution  of  wealth,  it  is  claimed,  has  been 
rendered  more  inequitable  by  unjust  discrimina- 
tions in  railway  rates. 

The  charge  is  just.     The  railways  do  practice 


RAILWAYS  AS  MONOPOLIES.  163 

discrimination  by  virtue  of  their  monopoly  and 
their  control  of  rates.  The  report  of  the  Inter- 
State  Commerce  Commission  for  1898  contains 
the  following  statement,  repeated  in  the  report 
for  1899:  "  Ifeanwhile  the  situation  has  become 
intolerable,  both  from  the  standpoint  of  the  pub- 
lic and  the  carriers.  Tariffs  are  disregarded,  dis- 
criminations constantly  occur,  the  price  at  which 
transportation  can  be  obtained  is  fluctuating  and 
uncertain.  Railroad  managers  are  distrustful  of 
each  other,  and  shippers  all  the  while  in  doubt  as 
to  the  rates  secured  by  their  competitors.  All  this 
augments  the  advantages  of  large  capital  and 
tends  to  the  injury  and  often  to  the  ruin  of  smaller 
dealers.  These  are  not  only  matters  of  gravest 
consequence  to  the  business  welfare  of  the  coun- 
try, but  they  concern  in  no  less  degree  the  higher 
interests  of  public  morality." 

Discriminations  are  of  various  kinds  and  are 
generally  classified  under  three  heads  —  discrimi- 
nations between  classes  of  freight,  discriminations 
between  places  and  discriminations  between  per- 
sons. Inasmuch  as  classes  of  freight  and  places 
do  not  feel,  but  are  intimately  connected  with  peo- 
ple who  do  feel,  the  first  and  second  kinds  of  dis- 
crimination may  for  practical  purposes  be  reduced 
to  the  third.  All  discriminations  that  are  of 
economic  or  ethical  importance  are  discriminations 
between  persons. 


164    MONOPOLIES   PAST   AND    PRESENT. 

Discrimination  between  different  classes  of 
freight  is  unavoidable.  It  costs  a  railway  com- 
pany little,  if  any  more,  to  transport  a  car-load  of 
silk  than  a  car-load  of  coal,  yet  the  coal  must  be 
hauled  at  a  much  lower  rate  than  the  silk,  if  it  is 
to  be  hauled  at  all.  The  average  rate  of  .724  cent 
per  ton-mile,  if  applied  to  both  coal  and  silk,  would 
be  a  charge  of  $7.24  per  ton  for  a  thousand  miles. 
This  charge  would  amount  to  perhaps  200^  on 
the  value  of  the  coal  and  perhaps  not  more  than  a 
tenth  of  1^  on  the  value  of  the  silk.  The  traffic 
in  coal  could  not  bear  this  charge  or  if  it  could 
bear  it,  it  would  be  an  intolerable  burden  upon 
the  consumers  of  coal,  falling  most  heavily  upon 
the  middle  and  lower  classes  of  the  people.  The 
traffic  in  silk  could  bear  a  rate  ten  times  or  even 
one  hundred  times  as  high  as  the  average  rate 
without  any  great  injury  to  the  traffic  or  to  the 
consumers. 

It  has  therefore  come  to  pass  that  there  is  a 
classification  of  freight  based  on  value  and  not  on 
weight  and  the  rates  are  based  not  on  the  cost 
of  service  but  on  what  the  traffic  will  bear.  That 
this  is  a  correct  principle  in  theory  can  hardly  be 
doubted.  There  ought  to  be  a  settled  classifica- 
tion of  freight  in  accordance  with  a  rough  esti- 
mate of  values.  In  this  way,  the  people  would  pay 
according  to  their  abilitv  and  the  service  rendered. 
The  actual  classification  is,  however,  not  always 


RAILWAYS  AS  MONOPOLIES.  165 

based  upon  relative  values,  but  upon  some  more 
arbitrary  application  of  the  principle  of  charging 
what  the  traffic  will  bear.  If  silk  were  placed  in 
the  lowest  class  and  coal  in  the  highest,  we  should 
have  two  extreme  but  not  impossible  cases.  Be- 
tween these  extremes  there  is  vast  room  for  incon- 
sistencies consistent  with  the  principle  of  charg- 
ing what  the  traffic  will  bear. 

More  important  than  discrimination  between 
classes  of  freight  is  diserimination  between  places. 
It  is  sometimes  in  the  power  of  a  railway  to  crush 
a  city  into  a  town,  a  town  into  a  village.  It  is  not 
infrequently  within  the  power  of  a  railway  or  a 
combination  of  railways  to  raise  a  village  to  the 
wealth  and  status  of  a  city,  a  city  to  the  power  and 
grandeur  of  a  metropolis.  All  that  is  necessary 
is  to  lower  rates  in  the  one  case  or  to  raise  them 
in  the  other.  Other  things  being  equal,  the  town 
that  gets  the  lower  rates  will  surpass  its  rival,  cap- 
ture its  trade,  adopt  its  citizens.  A  city  that  en- 
joys low  railway  rates  is  a  Mecca  for  manufac- 
turers and  merchants.  Coal  is  plentiful,  raw  ma- 
terials are  cheap,  goods  can  be  shipped  to  con- 
sumers at  the  lowest  rates,  every  circumstance  is 
favorable.  The  railways  have  had  much  to  do 
with  the  concentration  of  population  in  our  great 
cities  and  with  the  consequent  depletion  and  ruin 
of  our  country  towns. 

This  discrimination  has  been  due  to  a  variety 


166  MONOPOLIES   PAST   AND   PRESENT. 

of  causes.  Sometimes  nature  lias  already  discrimi- 
nated in  favor  of  a  city  by  supplying  a  favorable 
location  in  a  rich  country  and  near  a  convenient 
waterway.  Cities  situated  on  the  Great  Lakes, 
the  St.  La^vrence,  the  Mississippi,  or  on  the  ocean, 
have  a  great  advantage  over  inland  cities.  They 
have  cheap  transportation  by  water,  at  least  in 
summer,  and  railway  rates  must  fall,  to  compete 
with  rates  by  steamship  and  sailing  vessel.  It 
pays  a  railM^ay  to  compete  vnth  water  transporta- 
tion at  rates  that  will  barely  cover  running  ex- 
penses, when  the  local  freight  can  be  carried  at 
rates  sufficient  to  pay  dividends.  The  railway 
must  charge  higher  rates  for  local  traffic  in  order 
to  make  up  for  the  low  rates  on  through  traffic. 
Local  merchants  and  manufacturers  in  local  to^\^lS 
pay  more,  that  metropolitan  merchants  and  man- 
ufacturers may  pay  less.  The  rates  from  San 
Francisco  to  Chicago  are  often  no  higher  than 
the  rates  from  San  Francisco  to  Denver  or  from 
Denver  to  Chicago  or  from  Denver  to  Carson 
City.  The  difference  between  long  and  short  hauls 
has  nothing  to  do  with  the  rates  in  such  cases. 
The  distance  between  San  Francisco  to  New  York 
by  way  of  the  Canadian  Pacific  is  a  thousand 
miles  greater  than  by  the  direct  American  route, 
but  the  Canadian  Pacific  not  only  charges  the 
same  rates  as  the  American  lines,  but  actually 
claims  a  differential,  because  of  the  greater  time 
required  for  transportation  by  the  longer  route. 


RAILWAYS  AS  MONOPOLIES.  167 

Another  reason  for  discrimination  between 
places  is  found  in  the  fact  that  when  a  city  be- 
comes large  the  volume  of  traffic  becomes  greater 
and  the  railways  can  handle  it  with  greater  care 
and  economy  than  the  same  volume  of  traffic  from 
ten  or  twenty  smaller  cities.  A  great  city  tends 
to  become  greater  for  other  reasons,  but  it  is  to 
the  interest  of  the  railways  to  encourage  this 
growth,  and  this  it  does  by  the  method  of  low 
rates.  From  the  point  of  view  of  the  railway,  it 
is  not  necessary  that  small  cities  should  do  any 
manufacturing.  The  railway  prefers  to  have  it 
done  in  large  cities  and  to  restrict  the  small  towns 
to  the  work  of  local  distribution.  Even  the  busi- 
ness of  distributing  goods,  as  carried  on  by  whole- 
sale houses,  is  often  taken  away  from  them  by 
rates  enabling  manufacturers  in  large  cities  to  sell 
directly  to  the  country  stores.  The  tendency  is 
therefore  to  build  up  the  country  districts  and  the 
metropolis  at  the  expense  of  the  small  city.  Per- 
haps this  tends  to  economy  of  energy,  but  one 
cannot  but  sympathize  ^^'ith  the  angry  feelings  of 
the  citizens  of  a  small  city,  when  they  find  them- 
selves sacrificed  for  the  benefit  of  society  at  large. 
If  railway  rates  could  be  made  equal  throughout 
the  United  States,  it  is  highly  probable  that  the 
great  cities  would  grow  less  rapidly  and  that  man- 
ufacturing industries  would  spring  up  in  many 
small  towns. 


168    MONOPOLIES   PAST   AND    PRESENT. 

Another  reason  for  discrimination  is  the  exist- 
ence of  competing  railways.  Where  two  or  more 
railways  compete,  it  is  impossible  to  avoid  a  fall 
in  rates  and  when  combination  takes  place,  it  is 
difficult  to  raise  rates  to  the  former  standard.  A 
place  where  there  are  several  roads  has  therefore, 
in  general,  lower  rates  than  a  place  where  there  is 
only  one  road. 

There  are  still  other  reasons  for  discrimination 
between  places.  Sometimes  the  railway  magnates 
have  business  interests  in  certain  places,  they  hold 
land,  they  own  houses,  they  have  shares  in  indus- 
trial companies.  They  decide  that  these  places 
must  be  built  up  and  they  build  them  up  by  means 
of  discriminating  rates.  Sometimes  the  citizens 
of  one  city  acquire  influence  with  the  railway 
companies  and  thus  obtain  concessions  denied  to 
less  influential  or  less  enterprising  cities. 

For  these  and  other  reasons  discriminations  ex- 
ist. The  effects  are  not  wholly  evil  in  the  long 
run  but  much  temporary  injustice  is  done  and  it  is 
a  grave  question  whether  the  growth  of  enormous 
cities  has  not  been  excessive  and  unhealthy.  It  is 
also  a  grave  question  whether  the  railways  ought 
to  be  allowed  to  exercise  such  great  power  over 
the  industrial  development  of  the  country.  They 
have  powers  of  life  and  death.  If  the  interests  of 
the  railways  arc  identical  with  those  of  the  people 
at  large  and  if  they  can  be  trusted  to  perceive  this 


RAILWAYS  AS  MONOPOLIES.  169 

identity,  then  we  can  leave  the  future  in  their 
hands  and  trust  that  only  good  will  come  to  each 
and  all. 

Still  more  serious  than  discrimination  between 
places  is  direct  discrimination  between  persons. 
There  is  perhaps  a  natural  and  necessary  discrimi- 
nation between  persons,  according  to  the  amount 
of  their  shipments.  A  man  who  ships  by  the  car- 
load, can  with  some  show  of  reason  claim  a  lower 
rate  than  the  man  who  ships  by  the  ton  or  hun- 
dredweight. Ten  shipments  of  one-tenth  of  a  car- 
load are  more  expensive  to  the  railway  than  one 
shipment  of  a  whole  car-load,  especially  where 
the  large  shipper  loads  and  unloads  his  own  cars. 
Perhaps  it  may  be  admitted  that  one  who  ships 
by  the  car-load,  loading  and  unloading  his  own 
cars,  ought  to  enjoy  a  lower  rate  than  one  who 
ships  less  than  a  car-load  at  a  time.  Beyond  this 
point,  it  is  hard  to  see,  on  the  basis  of  cost  of 
service,  why  any  further  discrimination  should 
be  made.  The  cost  of  hauling  twenty  cars  belong- 
ing to  one  shipper,  is  not  much  less  than  the  cost 
of  hauling  twenty  cars  belonging  to  twenty  ship- 
pers. There  is  a  difference,  but  not  sufficient  to 
justify  any  great  discrimination. 

Discriminations  are  granted  for  other  reasons 
than  the  consideration  of  cost  of  service.  If  there 
are  several  competing  companies,  the  temptation 
to  discriminate  is  very  great.     The  small  shipper 


170     MONOPOLIES    PAST   AND    PRESENT. 

has  little  power  to  secure  low  rates.  The  railways 
do  not  care  whether  they  secure  his  shipments  or 
not,  unless  he  is  in  combination  with  a  number  of 
small  shippers.  When  a  large  shipper  enters  a 
railway  office  he  is  treated  with  great  considera- 
tion, Wlien  he  asks  for  low  rates  the  officials 
are  apt  to  grant  them  if  they  possibly  can.  If  they 
refuse  at  first  a  threat  to  ship  by  some  other 
road  soon  brings  about  a  more  compromising  atti- 
tude. 

Another  aspect  of  discrimination  is  clearly 
sho^vn  in  the  testimony  of  C.  M.  Wicker  of  Chi- 
cago. "  Here  is  quite  a  grain  point  in  Iowa,  where 
there  are  five  or  six  elevators.  As  a  railroad  man, 
I  would  try  and  hold  all  these  dealers  on  a  level 
keel,  and  give  them  all  the  same  tariff  rate.  But 
suppose  there  was  a  road  five  or  six  nules  across 
the  country  and  all  these  dealers  should  begin  to 
drop  in  on  me  every  day  or  two  and  tell  me  that 
the  road  across  the  country  was  reaching  within 
a  mile  or  two  of  our  station  and  dra\ving  to  itself 
all  the  grain.  You  might  say  that  it  would  be 
the  right  and  just  thing  to  do  to  give  all  the  five 
or  six  dealers  at  the  station,  a  special  rate  to  meet 
that  competition  through  the  country.  But,  as  a 
railroad  man,  I  can  accomplish  the  purpose  better 
by  picking  out  one  good,  smart,  live  man,  and, 
giving  him  a  concession  of  three  or  four  cents  a 
bushel,  let  him  go  there  and  scoop  the  business. 


RAILWAYS  AS  MONOPOLIES.  171 

I  would  get  the  tonnage,  and  that  is  what  I  want. 
But  if  I  give  it  to  five,  it  is  known  in  a  very  short 
time."  Such  discriminations  as  this  occur  even 
where  there  is  no  competing  road.  Provided  that 
a  railway  can  get  the  tonnage,  it  prefers  to  deal 
with  one  shipper  rather  than  twenty. 

The  reduction  in  rates  is  generally  given  in  the 
form  of  a  rebate,  especially  where  such  reduction 
is  contrary  to  railwa_y  agreements  or  to  state  or 
federal  laws.  The  shipper  pays  the  usual  rates, 
receiving  his  receipts  in  due  form,  and  at  some 
convenient  time  he  receives  a  rebate  equal  to  the 
difference  between  the  full  rates  and  the  special 
rate  granted  to  him.  The  books  of  the  railway 
company  do  not  show  that  any  rebate  has  been 
granted  and  the  shipper  does  not  openly  boast  of 
it.  His  rivals  fail,  his  business  prospers.  Why 
should  he  exult  over  a  fallen  foe  or  reveal  his 
methods  of  business  to  an  ignorant  public? 

In  the  face  of  discrimination  it  has  become 
almost  impossible  for  a  small  capitalist  to  do  busi- 
ness. A  very  slight  discrimination  is  often  suifi- 
cient  to  ruin  all  those  who  do  not  receive  it.  The 
people  who  receive  low  rates  are  not  the  weak 
who  need  them  but  the  strong  who  do  not  need 
them.  The  result  is  that  the  weak  grow  weaker 
and  the  strong  become  stronger. 

There  is  therefore  a  constant  tendency  for  the 
business  of  the  country  to  be  concentrated  in  the 


172     MONOPOLIES    PAST   AND    PRESENT. 

hands  of  a  few  gigantic  corporations  which  we 
call  trusts.  There  are  other  causes  producing  this 
concentration  but  perhaps  none  more  important 
than  discrimination  in  railway  rates.  The  rail- 
way has  been  called  "  the  mother  of  monopolies," 
and  if  trusts  are  monopolies  the  expression  is  not 
wholly  misleading.  The  case  of  the  Standard  Oil 
Company  is  notorious.  The  creation  of  this  tre- 
mendous monopoly  was  greatly  aided  by  favors 
obtained  from  certain  railway  companies.  The 
extent  to  which  such  discrimination  may  go  is 
indicated  by  a  letter  filed  by  the  receiver  of  the 
Cleveland  and  Marietta  Eailroad,  containing  this 
remarkable  proposal:  ''The  Standard  Oil  Com- 
pany threatens  to  store  and  afterwards  pipe  all 
oils  under  its  control,  unless  you  make  the  follow- 
ing arrangements,  viz. :  you  shall  make  a  uniform 
rate  of  thirty-five  cents  per  barrel  for  all  persons 
excepting  the  Standard  Oil  Company;  you  shall 
charge  them  ten  cents  per  barrel  for  their  oil  and 
also  pay  them  twenty-five  cents  per  barrel  out  of 
the  thirty-five  cents  collected  of  other  shippers." 
It  happens  at  times  that  a  railway,  in  its  cor- 
porate capacity,  or  through  its  managers,  is  inter- 
ested in  some  other  industry,  such  as  the  coal 
business.  When  this  happens,  the  railway  com- 
pany is  strongly  tempted  to  use  its  monopoly  of 
transportation  for  the  purpose  of  building  up  a 
monopoly  in  the  other  line  of  business.     A  case 


RAILWAYS  AS  MONOPOLIES.  173 

in  point  is  that  of  the  "  Reading  Coal  Combine  " 
in  Pennsylvania  and  Kew  Jersey,  which  in  the 
year  1892  obtained  control  of  a  great  portion  of 
the  anthracite  coal  in  the  United  States,  with  the 
result  that  the  price  of  coal  was  raised  $1.25  a 
ton.  "  Had  the  combination  existed  the  entire 
twelve  months,  more  than  $50,000,000  would 
have  been  taken  from  the  pockets  of  the  con- 
sumers of  this  necessary  article."  In  many  parts 
of  the  United  States  a  coal  company  cannot  hope 
to  succeed  in  business  without  an  alliance  with  a 
railway  company.  The  railway  company  cannot 
refuse  to  transport  coal  but  it  can  charge  the 
highest  rates  and  can  delay  the  cars  at  every 
siding  along  the  line. 

Railway  companies  are  not  infrequently  con- 
nected with  the  real-estate  business  and  still  more 
often  with  the  business  of  politics.  The  railways 
in  their  own  way  applaud  those  reformers  who 
strive  to  introduce  business  methods  into  politics. 
They  cheerfully  assent  to  the  proposition  that 
politics  is  business  and  are  not  prepared  to  deny 
that  business  is  politics.  The  influence  of  the 
railways  with  state  and  federal  governments  is 
very  great  and  is  always  exercised  for  the  benefit 
of  the  railways.  Jay  Gould  is  reported  to  have 
said:  "  With  a  Democrat  I  am  a  Democrat,  with 
a  Republican  I  am  a  Republican,  but  at  all  times 
I  am  for  the  Erie  Railway." 


174    MONOPOLIES   PAST   AND    PRESENT. 

There  is  a  railway  problem.  It  is  primarily  a 
problem  concerning  rates.  Its  solution  will  in- 
volve the  establishment,  as  far  as  practicable,  of 
rates  reasonable  and  just  to  the  investor,  the  ship- 
per, the  railway  employee  and  the  general  public. 

A  number  of  solutions  have  been  proposed. 
The  advocates  of  industrial  liberty  have  a  very 
simple  solution.  They  advise  that  the  railways 
be  let  alone.  They  say  that  the  law  of  supply 
and  demand  is  sufficient  to  work  out  the  greatest 
good  to  the  greatest  number.  They  stand  upon 
the  principle  of  buying  in  the  cheapest  market 
and  selling  in  the  dearest  and  they  claim  that  the 
principle  is  applicable  to  every  department  of  in- 
dustrial life,  including  the  management  of  rail- 
ways. In  railway  language,  this  doctrine  is  known 
as  the  principle  of  charging  what  the  traffic  will 
bear.  A  railway  business,  it  is  said,  is  not  essen- 
tially different  from  any  other  business  in  which 
prices  are  regulated  by  supply  and  demand.  The 
capitalist  who  builds  a  railway  is  a  business  man. 
He  invests  his  capital  with  a  view  to  profit.  He 
takes  risks  and  ought  to  receive  the  full  reward 
of  his  enterprise.  When  the  road  is  built  he 
charges  what  the  service  is  worth.  If  the  shipper 
thinks  the  rate  too  high  he  is  not  compelled  to 
ship.  He  ships  by  the  railway  because  the  rail- 
way rates  are  cheaper  than  rates  by  other  forms 
of  transportation.    In  fact,  rates  are  very  low  and 


RAILWAYS  AS  MONOPOLIES.  175 

a  great  part  of  the  wealth  of  the  country  has 
been  created  by  the  railways.  Discrhnination  be- 
tween classes  of  freight  is  plainly  necessary  and 
proper.  Coal,  lumber  and  iron  ore  cannot  bear 
the  rates  imposed  on  silk  and  jewelry.  Discrimi- 
nation between  places  is  also  inevitable.  Nature 
has  already  discriminated  in  this  way.  It  is  for 
the  advantage  of  the  public  that  business  should 
be  concentrated.  The  railways  could  not  prevent 
this  concentration  if  they  would.  Discrimination 
between  persons  is  likewise  unavoidable.  Nature 
has  made  men  unequal.  Circumstances  have  in- 
creased the  inequality.  Capable  business  men 
have  power  over  the  railways  because  of  their 
large  shipments.  They  seek  to  buy  transportation 
in  the  cheapest  market  and  one  railway  must  sell 
to  them  as  cheaply  as  another  or  else  be  content 
to  lose  their  patronage.  A  railway  is  a  business 
enterprise  and  must  be  run  on  business  principles. 
Its  chief  end  is  dividends.  The  policy  which  will 
secure  the  largest  dividends  is  the  right  policy. 
No  other  business  is  required  to  sacrifice  profits  to 
personal  considerations.  At  times  certain  persons 
suffer  but  is  not  the  progress  of  industry  always 
marked  by  the  wrecks  and  failures  of  those  who 
have  been  unable  to  advance?  The  weak  must  fall 
by  the  way  and  the  strong  must  push  on  to  greater 
things.  Only  in  this  way  can  the  best  interests 
of  mankind  be  secured.    Interference  by  the  gov- 


176     MONOPOLIES    PAST   AND    PRESENT. 

ernment  can  only  do  harm.  The  proper  sphere  of 
government  is  very  limited.  It  includes  little 
more  than  the  protection  of  citizens  from  physical 
violence  and  from  the  ravages  of  disease.  The 
government  may  also  establish  uniform  Aveights 
and  measures,  a  system  of  money  and  credit,  a 
postal  system,  a  system  of  public  schools  and  a 
few  minor  institutions.  Beyond  this  sphere  it 
ought  not  to  go  and  cannot  go  without  serious 
wrong  and  damage  to  all  concerned.  A  railway 
is  a  private  institution,  created  by  private  capital 
for  private  gain  and  it  is  neither  just  nor  feasible 
to  interfere  wnth  its  operations  in  any  way. 

These  and  many  other  arguments  are  thought 
to  prove  that  the  railway  problem  can  best  be 
worked  out  by  the  railways  themselves  in  con- 
junction with  the  individual  efforts  of  those  who 
use  the  railways.  The  railways  may  very  properly 
combine  to  serve  their  ends  but  the  people  cannot 
combine  for  their  own  protection  without  injury 
to  the  railways  and  to  themselves, —  witness  the 
disastrous  Granger  legislation. 

It  is  forgotten  by  the  advocates  of  this  policy 
that  the  railways  are  already  closely  allied  with 
the  government,  that  already  they  have  made  the 
government  a  partner  in  their  business.  Apart 
from  the  lands  and  money  lavished  upon  the  rail- 
ways by  the  government,  the  railways  have  ex- 
ercised, by  consent  of  the  government,  one  of  the 


RAILWAYS  AS  MONOPOLIES.  177 

rights  of  soverGignty,  the  right  of  eminent  do- 
main. In  extending  their  tracks  throughout  the 
country,  across  farms,  through  houses,  into  popu- 
lous cities,  the  railways  have  not  paid  the  prices 
demanded  by  the  owners  of  land  and  buildings, 
according  to  the  principle  of  industrial  liberty, 
which  they  so  highly  commend.  They  have  ap- 
pealed to  the  government  and  by  exercise  of  the 
right  of  eminent  domain  these  lands  and  buildings 
have  been  condemned  to  be  sold  at  a  valuation 
agreed  upon  by  a  court  of  arbitration.  What  is 
now  to  prevent  the  people  from  appealing  to  the 
government  to  fix  rates  by  a  similar  court  of  arbi- 
tration? The  principle  is  the  same  in  both  cases. 
The  justification  is  the  same. 

Again,  the  railways  are  highways.  ISTo  other 
highways  are  available  for  the  transportation  of  the 
nation's  freight,  amounting  to  959,000,000  tons 
per  annum,  not  to  speak  of  523,000,000  passen- 
gers. Highways  have  been  public  property  from 
time  immemorial.  The  "  King's  highway  "  has 
been  superseded  by  the  railway,  but  why  is  the 
railway  more  independent  than  the  "  King's  high- 
way? "  Even  if  it  be  true  that  the  railways,  like 
the  turnpikes  of  former  days,  belong  to  private 
corporations,  why  are  these  corporations  allowed, 
unlike  the  turnpike  companies,  to  fix  their  own 
tolls?  Tolls  charged  on  roads  and  bridges  are 
closely  allied  to  taxes  and  the  right  to  tax  should 
12 


178  MONOPOLIES   PAST   AND    PRESENT. 

belong  to  the  government  alone.  As  Justice  Har- 
lan has  said :  "  A  railway  is  a  public  highway,  es- 
tablished primarily  for  the  convenience  of  the 
people  and  to  subserve  public  ends  and  therefore 
subject  to  government  control  and  regulation." 

Once  more,  it  may  be  justly  asserted  that  rail- 
way transportation  is  not  like  other  commodities 
and  services  that  are  bought  and  sold.  It  is  pecu- 
liar in  this  respect,  that  there  is  no  substitute  for 
it.  If  a  merchant  find  wheat  too  high  he  may 
buy  oats.  If  the  people  cannot  afford  to  eat  beef 
they  may  eat  pork.  Xo  such  option  is  theirs 
with  regard  to  railway  transportation.  Every 
merchant  must  buy  it,  directly  or  indirectly,  and 
every  person  is  affected  by  the  price  of  it,  for  it 
forms  an  element  in  the  price  of  every  commodity. 
As  Stickney  has  said:  "  It  is  nonsense  to  call  that 
merchandise  which  no  man  can  refuse  to  buy." 
As  Lord  Hale  has  said:  "When  property  is  so 
used  as  to  become  affected  with  a  public  interest 
it  ceases  to  be  juris  privati  only."  Railway  trans- 
portation, therefore,  ought  not  to  be  bought  in 
the  cheapest  market  and  sold  in  the  dearest.  The 
common  carriers  of  former  times  were  subject  to 
regulation  because  of  their  peculiar  relation  to 
the  public  and  the  common  cab-man  of  our  mod- 
em cities  is  not  allowed  to  exact  more  than  the 
law  allows.  The  railways  are  common  carriers 
and  more  than  that  and  as  such  they  are  proper 
subjects  for  government  control  and  regulation. 


RAILWAYS  AS  MONOPOLIES.  170 

A  railway  is  a  natural  monopoly  and  is  pos- 
sessed of  great  power.  If  left  to  itself  it  may  be 
expected  to  use  its  power  for  its  own  interests. 
To  a  large  extent  the  interests  of  the  railways 
and  the  public  are  the  same.  To  some  extent  at 
least  they  are  diverse.  Even  if  they  were  identi- 
cal in  the  long  run,  could  the  railways  be  trusted 
to  perceive  that  fact  and  always  to  prefer  the  in- 
terests of  the  future  to  those  of  the  present  time? 
As  a  rule  railway  directors  are  human  and  like 
to  enjoy  the  fruits  of  their  labors  in  the  present 
life. 

The  principle  of  charging  what  the  traffic  will 
bear  may  be  interpreted  in  a  variety  of  ways.  If 
it  means  charging  no  more  than  the  traffic  will 
bear  there  is  perhaps  little  objection  to  it.  If  it 
means  charging  all  that  the  traffic  will  bear  it 
partakes  of  the  nature  of  the  theoretical  landlord 
who  charges  as  rent  the  total  product  of  the  land 
minus  the  cost  of  living  of  the  tenant  estimated 
on  the  basis  of  bare  subsistence.  If  it  means 
charging  more  than  the  traffic  will  bear  it  means 
discrimination  between  places  and  persons  and 
an  emulation  of  divine  power  in  casting  down 
the  mighty  from  their  seats  and  exalting  them  of 
low  degree.  Such  an  elastic  principle  can  hardly 
be  taken  as  an  ideal  automatic  regulator  of  rail- 
way rates.  It  is  not  an  ethical  standard.  It  is  not 
even  a  sound  economic  principle.     It  is  at  best  a 


180  MONOPOLIES   PAST   AND   PRESENT. 

rule  of  thumb  used  to  avoid  the  labor  of  a  difficult 
calculation  and  to  conceal  the  inconsistencies  of 
rate-makers. 

It  may  safely  be  said  that  the  let-alone  remedy 
is  discredited  and  practically  abandoned  even  by 
its  own  defenders.  Nature  may  in  time  work  out 
a  cure  but  meanwhile  the  patient  may  die. 

K  we  abandon  the  solution  proposed  by  those 
who  favor  industrial  liberty,  we  must  uphold 
some  form  of  government  activity.  The  let-alone 
theory  is  logically  consistent  from  its  point  of 
view.  At  the  opposite  extreme  is  the  theory 
which  advocates  government  ownership  and  man- 
agement and  this  theory  is  also  logical  and  con- 
sistent from  a  theoretical  point  of  view.  The 
simplest  solution  of  the  railway  problem  in  the 
United  States  would  seem  to  lie  in  the  ownership 
of  all  the  railways  by  the  federal  government 
There  would  then  be  no  discriminations  and  no 
over-charges.  There  would  be  stability  of  rates. 
The  profits,  if  there  were  any,  would  be  used  as 
public  interest  might  dictate.  There  would  be  a 
great  saving  in  the  expenses  of  railway  manage- 
ment. There  would  be  no  unnecessary  advertis- 
ing and  none  of  the  losses  due  to  competition.  A 
single  great  bureau  would  do  the  work  now  done 
by  836  independent  companies.  There  would  be 
a  saving  in  salaries  and  office  expenses.  Fewer 
cars   would   be   required,   fewer   engineers,   con- 


RAILWAYS  AS  MONOPOLIES.  181 

ductors  and  brakemen  would  be  needed.  Parallel 
roads  would  be  abandoned  where  they  did  not  per- 
form some  special  and  necessary  service.  Traffic 
would  follow  the  shortest  routes.  The  long  haul 
would  be  given  up  wherever  a  short  haul  could  be 
made.  There  would  be  no  unnecessary  competi- 
tion with  waterways.  "Where  steamships  could  do 
the  work  better  and  more  cheaply  than  the  rail- 
ways they  would  be  allowed  to  do  it  and  the  peo- 
ple would  reap  the  benefit.  In  these  and  other 
ways  the  saving  would  be  tremendous.  We 
should  have  a  gigantic  trust  with  all  the  benefits 
accruing  to  the  public  and  not  to  private  capital- 
ists. 

Government  ownership  is  common  on  the  con- 
tinent of  Europe.  ISTearly  all  the  countries  in 
continental  Europe  own  part  of  their  railways. 
The  state  railways  are  on  the  whole  successfully 
managed.  The  following  table  shows  the  length 
of  state  and  private  lines  in  the  chief  European 
countries  in  the  year  1891. 

state  lines,  PriTate  lines, 

Country.  miles.  miles. 

Germany 22,059  3,311 

Sweden : 1,623  3,276 

Norway 928  42 

Denmark .  880  90 

France ; ..  1,570  21,341 

Belgium 2,018  792 

Holland 927  788 


182     MONOPOLIES   PAST   AND    PRESENT. 

n^.,„tT.„  State  lines,  Private  lines, 

Country.  j^jl^g  miles. 

Italy 4,927  2,690 

Austria 3,163  6,343 

Hungary 2,749  4,002 

Russia ^  5,309  12,750 

The  argument  in  favor  of  government  owner- 
ship is  very  strong  but  by  no  means  conclusive. 
It  is  urged,  on  the  contrary,  that  the  American 
railways  are  already  the  best  in  the  world  in  re- 
gard to  accommodation  for  passengers,  efficient 
handling  of  freight,  speed,  rates  and  general  man- 
agement. All  this  has  been  accomplished  under 
the  system  of  private  ownership.  Attention  is 
also  called  to  the  fact  that  the  railway  system  of 
England,  where  private  ownership  prevails,  is  su- 
perior to  any  of  the  continental  system. 

It  is  held  that  we  have  no  civil  service  capable 
of  managing  the  railways.  It  is  further  held  that 
the  country  is  better  without  such  a  civil  service 
or  "  bureaucracy."  To  nationalize  the  railways 
would  be  to  pro\ade  a  tremendous  engine  for 
political  corruption.  It  would  be  necessary  for 
the  government  to  incur  an  appalling  national 
debt  in  purchasing  the  railways  from  their  present 
owners.  In  all  probability  the  government  would 
have  to  pay  more  than  the  value  of  the  railways 
and  as  a  result  the  credit  of  the  country  would 
be  damaged  if  not  destroyed.  The  management 
of  the  railways,  under  a  civil  service  lacking  the 


RAILWAYS  AS  MONOPOLIES.  183 

stimulus  of  private  gain,  would  be  ineflS.cient, 
wasteful  and  unprogressive.  Rates  would  rise 
rather  than  fall  and  there  would  be  no  profits  to 
divide  among  the  people  after  the  interest  on  the 
bonded  debt  had  been  fullj  paid. 

Finally  it  is  urged  that  there  is  at  present  no 
need  for  any  measure  so  radical  as  that  proposed 
by  the  advocates  of  government  ownership.  The 
present  system  is  established  and  ought  not  to  be 
overthrown  without  much  greater  need  than  is 
just  now  apparent.  The  evils  connected  with  the 
present  system  are  not  essential  to  it.  They  can 
be  removed  by  remedies  less  drastic  and  more  ef- 
fective. At  least,  these  remedies  ought  to  be 
fairly  tried.  If  after  a  fair  trial  they  can  be 
shown  to  be  ineffective,  then,  but  not  till  then, 
it  may  be  wise  to  abolish  the  present  system  and 
establish  a  new  and  revolutionary  system  in  its 
place. 

This  position  is  probably  correct.  The  success 
of  government  ownership  abroad  has  not  been  so 
remarkable  as  to  make  it  clear  that  the  United 
States  ought  immediately  to  follow  the  lead  of  for- 
eign nations.  There  are  grave  and  well-founded 
doubts  as  to  the  probable  success  of  government 
ownership  and  while  these  doubts  exist  a  wise  con- 
servatism must  give  to  the  present  system  the 
benefit  of  the  doubt  and  throw  the  burden  of  proof 
on  those  who  advocate  so  radical  a  change. 


184  MOXOI'OLIES    PAST   AND    PRESENT. 

Unless,  then,  we  are  prepared  to  adopt  the  ex- 
treme views  of  those  who  favor  government  own- 
ership or  the  equally  extreme  opinions  of  those 
who  would  let  the  railways  entirely  alone,  we  must 
take  the  middle  ground  of  compromise  and  advo- 
cate some  form  of  government  control. 

At  first,  and  for  many  years,  the  building  of 
railways  was  greatly  encouraged  in  the  United 
States.  Money,  land,  franchises,  exemptions  from 
taxation  and  other  privileges  were  freely  granted, 
and  the  railways  were  to  a  great  extent  allowed 
to  manage  their  affairs  in  their  o^\m  way.  It  was 
not  until  the  "  Granger  movement  "  that  any  wide- 
spread agitation  arose  against  the  power  of  the 
railways.  The  first  Granges  were  founded  in  the 
years  immediately  preceding  1870.  They  w^ere 
organizations  chiefly  composed  of  farmers  and 
were  established  in  the  western  states  for  the  pur- 
pose of  improving  the  homes  of  farmers  and  of 
rendering  their  occupation  more  profitable. 

It  was  soon  perceived  that  in  spite  of  the  fact 
that  vast  regions  had  been  opened  to  cultivation, 
in  spite  of  cheap  land  and  fertile  soil,  the  occupa- 
tion of  farming  was  by  no  means  highly  profitable 
to  the  average  farmer.  The  railways  had  opened 
up  the  country  and  they  claimed  the  right  to  an 
adequate  reward  for  the  services  they  had  ren- 
dered. The  price  of  wheat  was  high  in  Chicago 
but  low  in  the  country  districts  of  Illinois  and  Wis- 


RAILWATl^  AS  MONOPOLIES.  185 

consin,  the  difference  being  the  cost  of  transporta- 
tion from  the  local  points  to  the  general  market. 
The  railways  came  to  be  regarded  as  landlords  who 
charged  freight  rates  equivalent  to  as  high  a  rental 
as  the  farmers  could  bear  and  still  continue  to 
cultivate  the  soil.  The  farmers  were  owners  in 
name  but  tenants  in  fact.  It  was  seen  that  if  rates 
could  be  lowered  the  farmers  would  be  greatly 
benefited.  They  complained  of  discriminations 
and  had  other  grievances,  but  they  chiefly  com- 
plained of  exorbitant  rates,  and  of  consequent 
mortgages,  foreclosure  and  poverty. 

A  great  agitation  arose  against  the  railways. 
Legislatures  were  elected  pledged  to  secure  re- 
form in  rates.  Laws  were  passed  in  several 
states,  notably  Lllinois,  Iowa,  Minnesota  and  Wis- 
consin, creating  state  railway  commissions  with 
power  to  establish  "  reasonable  "  rates.  The  Illi- 
nois law  of  1873  may  be  taken  as  typical  This 
law  "  defines  and  prohibits  extortion  and  unjust 
discrimination,  makes  discriminating  charges 
prima  facie  evidence  of  unjust  discrimination; 
and  fij5:es  the  penalties  at  a  fine  of  from  $1,000  to 
$5,000  for  the  first  offense,  $5,000  to  $10,000 
for  the  second  and  $10,000  to  $20,000  for  the 
third  offense,  and  makes  the  company  liable  to  a 
fine  of  $25,000  for  each  subsequent  conviction. 
Persons  damaged  by  such  charges  may  also  re- 
cover triple  damages,  with  costs  of  suit  and  at- 


186  MONOPOLIES    PAST   AND    PRESENT. 

torney's  fee.  It  is  made  the  duty  of  the  commis- 
sion to  make,  for  each  railroad  doing  business  in 
the  state,  a  schedule  of  reasonable  maximum 
rates,  which  schedule  shall  in  all  suits  against  such 
railroads  be  deemed  and  taken  by  courts  as  prima 
facie  evidence  that  the  rates  therein  fixed  are 
reasonable." 

These  laws  were  opposed  by  the  railways  but 
were  declared  constitutional  in  1876  and  1877  and 
finally  in  1880.  By  this  time  there  was  a  reac- 
tion in  public  opinion,  due  to  a  variety  of  causes. 
The  commissions  had  established  maximum  rates 
sufiiciently  low  to  injure  the  railways  without 
greatly  benefiting  the  farmers.  Below  the  maxi- 
mum rates  there  was  still  plenty  of  room  for  dis- 
crimination and  rate-cutting,  especially  between 
competitive  points.  The  reduction  of  local  rates, 
together  with  the  fierce  competition  of  railways 
between  competitive  points,  caused  the  failure  of 
many  railway  companies  and  the  annihilation  of 
the  dividends  of  other  companies.  Foreign  capi- 
tal was  discouraged  and  other  industries  were 
thereby  injured.  These  evil  effects  were  com- 
monly attributed  to  the  Granger  laws  and  to  the 
ignorance  of  the  farmers  who  had  enacted  them. 
It  was  also  perceived  that  it  was  difficult,  if  not 
impossible,  successfully  to  regulate  interstate  traf- 
fic, which  could  not  be  regulated  by  any  one  stale. 

In  short,  the  reaction  resulted  in  the  modifi- 


RAILWAYS  AS  MONOPOLIES.  187 

cation  of  the  laws  and  in  the  relegation  of  the 
State  railway  commissions  to  the  position  of  ad- 
yisers  rather  than  rulers  and  it  came  to  be  under- 
stood that  the  problem  could  not  be  solved  by  state 
legislation,  but  only,  if  at  all,  by  federal  legis- 
lation. For  all  that,  the  moral  effect  of  the 
Granger  movement  was  on  the  whole  good. 
"  The  corporations  assumed  a  radically  different 
attitude  toward  the  community  and  toward  the 
law-making  power.  They  have  since  been  more 
ready  to  recognize  their  public  obligations,  greater 
respect  for  public  opinion  is  manifested  and  in 
consequence  the  recommendations  of  the  state 
conuiiissions,  which  were  at  first  contemptuously 
ignored,  have  since,  as  a  rule,  been  complied 
wdth." 

After  the  comparative  failure  of  the  Granger 
legislation  it  became  evident  that  federal  action 
was  necessary  to  exej-cise  control  over  interstate 
traffic,  which  could  not  be  regulated  by  the  in- 
dividual states.  On  March  17,  1885,  a  reso- 
lution was  adopted  by  the  Senate  of  the  United 
States  providing  "  that  a  select  committee  of  five 
Senators  be  appointed  to  investigate  and  report 
upon  the  subject. of  the  regulation  of  the  trans- 
portation by  railroad  and  water  routes  in  connec- 
tion or  in  competition  with  said  railroads  of  freight 
and  passengers  between  the  several  states."  The 
committee  was  appointed  by  the  president  of  the 


188  MO^'OPOLIES   PAST   AND    PRESENT. 

Senate  on  March  21,  1885,  and  consisted  of  Sen- 
ators Cullom,  Miller,  Piatt,  Gorman  and  Harris. 
After  a  thorough  investigation,  extending  over 
the  greater  part  of  the  year,  the  committee  pre- 
sented a  voluminous  report  to  the  Senate  on  Jan- 
uary 18,  1886.  This  report,  with  the  appendix, 
forms  a  volume  of  463  pages.  The  testimony  is 
contained  in  another  large  volume. 

In  pursuance  of  the  recommendations  of  the 
committee.  Congress  passed  "  An  Act  to  Regulate 
Commerce,"  which  was  approved  on  February  4, 
1887,  and  became  effective  in  all  its  sections  sixty 
days  later.  This  act,  commonly  called  the  Inter- 
state Commerce  Act,  is  directed  chiefly  against  dis- 
criminations between  persons  and  places.  It  also 
prohibits  pooling  and  provides  for  the  publication 
of  schedules  of  rates  by  every  railroad  engaged  in 
interstate  traffic.  The  railroads  are  obliged  to 
adhere  to  the  published  rates  and  not  to  change 
either  less  or  more  without  public  notice.  Pro- 
vision is  made  for  the  legal  prosecution  of  rail- 
roads Adolating  the  law  and  for  penalties  in  case 
of  conviction.  Section  2  provides  for  the  crea- 
tion of  an  Interstate  Commerce  Commission  of 
five  members,  to  be  appointed  by  the  President 
with  the  advice  of  the  Senate.  The  commission- 
ers hold  office  for  six  years,  one  commissioner  re- 
tiring every  year.  They  receive  salaries  of  $7,500 
apiece  and    the    secretary    receives    a    salary  of 


RAILWAYS  AS  MONOPOLIES.  189 

$3,500.  Section  23  provides  for  an  appropriation 
of  $100,000  for  the  fiscal  year  ending  June  30, 
1888. 

Since  the  year  1887  the  Interstate  Commerce 
Commission  has  published  annual  reports  contain- 
ing a  vast  amount  of  information  concerning  the 
railways  of  the  United  States  and  other  countries, 
together  mth  valuable  tables  of  statistics  of  all 
the  railways  of  the  United  States.  In  this  way 
reliable  information  about  railways  has  been 
widely  disseminated.  The  commission  has  also 
given  much  valuable  advice  to  the  railway  com- 
panies and  has  decided  a  large  number  of  minor 
disputes.  Many  thousands  of  letters  have  been 
written  and  many  thousands  of  reports  have  been 
"  wrapped  and  mailed." 

In  other  respects  the  commission  has  failed  to 
attain  the  objects  for  which  it  was  created.  The 
law  has  been  found  to  be  inadequate.  The  com- 
mission has  had  too  little  power  and  not  enough 
money.  Discriminations  have  not  been  prevented. 
The  celebrated  long  and  short  haul  clause  is  a 
dead  letter.  Pools  and  other  combinations  have 
continued  to  arise  and  pass  away  without  any 
reference  to  the  wishes  of  the  conmiission.  The 
publication  of  rates  has  been  of  little  or  no  benefit 
to  the  shipper,  who  knows  that  he  must  get  spe- 
cial and  secret  rates  or  cease  to  do  business.  The 
commissioners  themselves  realize  that  they  can  do 


190     MOXOPOLIES   PAST   AND    PRESENT. 

little  or  nothing.  In  their  thirteenth  annual  re- 
port they  say:  "  The  present  law  cannot  be  prop- 
erly enforced,  and  until  further  legislation  is  pro- 
vided the  best  efforts  at  regulation  must  be  feeble 
and  disappointing." 

The  commissioners  ask  for  legislation  which 
shall  empower  them  to  establish  a  uniform  classifi- 
cation of  freight  articles,  to  secure  greater  sta- 
bility of  rates  and  to  prevent  discriminations. 
They  even  hint  that  it  might  be  wise  to  allow  them 
to  establish,  not  maximum  rates,  but  complete 
schedules  of  actual  rates,  based  upon  reasonable 
principles. 

There  can  be  no  doubt  that  if  the  commission  is 
to  continue  to  exist  its  powers  ought  to  be  greatly 
enlarged.  It  ought  to  have  more  power  and  more 
money.  As  an  advisory  and  extra-judicial  body  it 
has  largely  failed.  As  a  powerful  commission, 
with  abundance  of  money  and  endowed  with  judi- 
cial and  executive  power,  it  would  be  able  to 
accomplish  something.  That  it  would  accomplish 
the  solution  of  the  railway  problem  is  by  no  means 
probable.  In  order  to  solve  this  problem  the 
commission  must  succeed  in  establishing  reason- 
able rates  and  in  preventing  discrimination. 

Railway  skeptics  uphold  this  interesting  series 
of  propositions.  First,  there  is  no  such  thing  as  a 
reasonable  rate.  Second,  if  there  is  a  reasonable 
rate  it  never  has  been  and  never  can  be  discovered. 


RAILWAYS  AS  MOXOPOLIES.  191 

Third,  if  it  could  be  discovered  it  could  never  be 
put  into  practice.  Those  who  favor  the  control 
of  rates  by  state  or  federal  commissions  hold  that 
an  ideal  and  reasonable  schedule  of  rates  can  be 
devised  and  enforced.  An  ideal  rate,  according 
to  Sticknev,  would  consist  of  two  elements  —  a 
fixed  -charge  for  terminal  expenses  and  a  fixed 
charge  per  mile  for  hauling  the  freight  between 
the  terminals,  recognizing  only  one  distance  be- 
tween any  two  points.  The  terminal  charge,  he 
thinks,  should  be  an  average  of  about  $1.20  per 
ton  throughout  the  United  States.  The  hauling 
charge  should  be  about  three  mills  per  ton-mile 
east  of  Chicago  and  five  mills  per  ton-mile  be- 
tween Chicago  and  the  Missouri  river.  West  of 
the  Missouri  there  might  be  two  similar  divisions, 
with  rates  corresponding  to  the  amount  of  trafiic 
and  the  cost  of  hauling  it. 

A  scheme  of  rates  like  this,  while  ideally  cor- 
rect, would  be  difficult  to  enforce  under  the  pres- 
ent railway  system  of  the  United  States,  chiefly 
because  of  four  reasons.  First,  because  of  the 
existence  of  several  roads  between  every  import- 
ant point.  The  longer  roads  would  not  be  con- 
tent to  see  the  trafiic  hauled  by  tlie  shorter  routes. 
They  would  demand  a  differential,  as  they  do  now, 
or  they  would  secretly  offer  lower  rates.  Sec- 
ondly, the  competition  of  water-routes  would  dis- 
organize the  schedules  and  compel  the  roads  to 


192  MONOPOLIES   PAST  AND   PRESENT. 

charge  less  for  the  long  haul  than  for  the  short 
haul,  to  the  disadvantage  of  local  points.  Thirdly, 
the  railways  would  continue  to  discriminate  be- 
tween shippers  and  it  would  be  difficult,  if  not  im- 
possible, to  secure  evidence  that  would  lead  to 
convictions.  Fourthly,  the  great  complexity  of  the 
railway  system  would  probably  be  an  insuperable 
barrier  to  the  enforcement  of  any  system  of  rates, 
however  ideal.  Stickney  says,  however,  that  a 
federal  Department  of  Railways  would  prevent 
rate-cutting  by  the  rigid  application  of  extreme 
penalties,  such  as  taking  possession  of  the  prop- 
erty of  an  offending  company,  as  can  be  done  in 
the  case  of  national  banks  when  they  transgress 
the  law. 

While  the  present  system  of  competing  roads 
exists,  it  is  hard  to  see  how  any  scale  of  rates 
could  be  reasonable  and  fair  at  once  to  the  ship- 
per, the  public  and  all  the  roads.  If  all  the  roads 
in  the  United  States  were  combined  into  a  single 
system,  a  schedule  of  rates  might  be  devised  which 
would  do  justice  to  all  concerned.  It  would  not 
be  difficult  in  a  country  like  Canada,  where  there 
are  but  two  great  railway  companies,  to  establish 
a  reasonable  system  of  railway  rates  and  to  insist 
on  conformity  to  it.  If  there  were  but  one  great 
system  in  Canada  the  problem  could  be  still  more 
easily  solved,  yet  even  then  it  w^ould  be  hard  to 
arrange  a  satisfactory  schedule,  because  of  the 
competition  of  American  roads. 


RAILWAYS  AS  MONOPOLIES.  193 

The  problem  of  railway  coutrol  will  be  simpli- 
fied by  consolidation.  The  process  of  consolida- 
tion is  still  going  on.  The  thirteenth  annual  re- 
port of  the  Interstate  Commerce  Commission  rec- 
ognizes this  fact.  "  If  the  plans  already  fore- 
shadowed are  brought  to  effective  results  and 
others  of  similar  scope  are  carried  to  execution, 
there  will  be  a  vast  centralization  of  railroad  prop- 
erties, with  all  the  power  involved  in  such  far- 
reaching  combinations,  yet  uncontrolled  by  any 
public  authority  which  can  be  efficiently  exer- 
cised." 

This  prophecy  is  being  fulfilled  and  hardly  a 
week  passes  without  news  of  combination  and  con- 
solidation in  one  part  of  the  country  or  another. 
Early  in  January,  1901,  persistent  rumors  were 
circulated  to  the  effect  that  a  strong  combination 
was  being  formed  between  the  ISTorthern  Pacific, 
the  Great  ISTorthern,  the  Chicago,  Milwaukee  and 
St.  Paul,  the  Baltimore  and  Ohio  and  the  Erie 
Railway  systems.  These  rumors  were  denied,  but 
they  had  not  died  aw^ay  when  an  actual  transaction 
took  place,  involving  the  consolidation  of  the  Jer- 
sey Central  with  the  Philadelphia  and  Reading, 
while  at  about  the  same  time  the  Erie  Railroad  ob- 
tained a  controlling  interest  in  the  Lehigh  Valley 
Railroad  and  purchased  the  Pennsylvania  Coal 
Company.  These  and  other  financial  operations 
are  thought  to  point  toward  a  consolidation  of  all 
13 


194  MONOPOLIES   PAST   AND    PRESENT. 

the  "  x\nthracite  "  roads  at  no  distant  date.  An- 
other important  consolidation  lately  completed  in- 
volves the  absorption  of  the  Mobile  and  Ohio  by 
the  Southern  Kailway  Company,  but  far  more  im- 
portant than  this  is  the  recent  combination  of  the 
Union  Pacific  with  the  Southern  Pacific  including 
the  control  of  the  Central  Pacific  and  securing 
community  of  interests  between  two  of  the  largest 
railway  systems  in  the  United  States.  This  gi- 
gantic "  deal  "  is  the  greatest  in  railway  history, 
but  the  record  thus  established  will  hardly  remain 
long  unbroken,  for  the  end  is  not  yet. 

Together  with  the  consolidation  of  railway  com- 
panies and  the  formation  of  gigantic  corporations 
in  all  fields  of  industry,  we  find  a  growing  tend- 
ency tow^ard  centralization  in  government.  The 
state  governments  have  shown  their  incapacity  in 
their  dealings  with  railways  and  trusts  and  it  now 
appears  that  national  enterprises  can  only  be  con- 
trolled by  the  national  government. 

The  distinction  between  state  and  interstate 
traffic  is  unreal  and  embarrassing.  It  ought  to  be 
abolished  and  the  national  government  should  have 
supervision  and  control  of  all  railways,  both  small 
and  great.  Instead  of  discouraging  the  formation 
of  pools,  combinations  and  consolidations,  it  should 
be  the  policy  of  the  national  government  to  en- 
courage, legalize  and  control  them,  and  if  possible 
to  hasten  the  day  when  all  the  railway  systems  of 


RAILWAYS  AS  MONOPOLIES.  195 

the  United  States  shall  be  united  in  one  vast  con- 
solidation, under  private  management,  but  under 
public  control.  By  means  of  private  management 
would  be  secured  the  benefits  of  private  enterprise 
and  by  means  of  public  control  would  be  secured 
justice  to  the  railways,  to  the  shipper  and  to  the 
public  at  large. 

Perhaps  as  good  a  plan  as  any  is  that  proposed 
by  George  H.  Lewis  in  his  "  i^ational  Consolida- 
tion of  Railways  in  the  United  States."  He 
would  establish  "  national  consolidation  through 
the  formation  of  a  great  national  railway  corpora- 
tion, o^^^ling  and  controlling  all  the  railways  of 
the  country  and  governed  by  an  organization  rep- 
resenting the  state  and  national  governments  and 
the  stockholders  owning  the  road."  According  to 
this  plan  the  state  and  federal  governments  would 
be  in  a  sense  partners  in  the  company  and  would 
have  a  control  over  all  the  affairs  of  the  company 
much  more  complete  and  effective  than  could  be 
exercised  by  any  commission  acting  from  without. 
The  joint  board  of  control  would  have  complete 
control  over  rates  but  it  would  not  be  necessary, 
as  in  Lewis'  plan,  to  place  any  limit  upon  divi- 
dends. Provided  that  rates  were  low  enough,  the 
consolidated  company  would  be  welcome  to  all  the 
dividends  it  could  earn.  Without  the  stimulus 
of  private  profit  the  company  might  as  well  be 
altogether  owned  and  operated  by  the  government. 


196    MONOPOLIES  PAST  AND   PRESHNT. 

Whatever  plan  of  public  control  may  be  pro- 
posed, it  is  well  to  remember  that  railways  are 
naturally  monopolies,  that  the  tendency  of  their 
evolution  is  toward  more  complete  monopoly  and 
that  the  hope  of  better  things  lies  not  in  the  ex- 
tinction of  monopoly,  but  in  the  control  and 
direction  of  it. 


VIII. 
CAPITALISTIC  MONOPOLIES. 


W.  W.  Cook,  "  The  Corporation  Problem,"  New  York,  1891. 
S.   C.   T.  DoDD,   "  Combinations,   Their   Uses  and   Abuses," 

New  York,   1892. 
J.    A.    HoBSON.    "  The   Evolution    of   Modern    Capitalism," 

London,  1894. 
J.  S.  Jeans,  "  Trusts,  Pools  and  Corners,"  London,  1894. 
H.  D.  Lloyd,  "  Wealth  against  Commonwealth,"  New  York, 

1894. 
Ernst  von  Halle,  "  Trusts  or  Industrial  Combinations  in 

th3  United  States,"  New  York,  1895. 
Frank    Parsons,    "  The    Telegraph    ISIonopoly,"    in    "  The 

Arena,"  1896-1897. 
"  Trusts  Pro  and  Con,"  a  report  of  the  Chicago  Conference 

on  Trusts,  Chicago,  1899. 
C.  F.  Beach,  Jr.,  "  Monopolies  and  Industrial  Trusts,"  St. 

Louis,   1898. 
George    Gunton,    "Trusts    and    the    Public,"    New    York, 

1899. 
David  Kinley,  "  Trusts,"   in  "  Progress,"  October,   1899. 
"  Corporations  and  Public  Welfare,"  Philadelphia,  1900. 
W.  M.  Collier,  "  The  Trusts,"  Boston,  1900. 
A.  B.  Nettleton,  "  Trusts  or  Competition,"  Chicago,  1900. 
R.  T.  Ely,  "  Monopolies  and  Trusts,"  New  York,  1900. 
J.  W.  Jenks,  "  The  Trust  Problem,"  New  York,  1900. 
J.   W.   Jenks,   "  Trusts   and   Industrial   Combinations,"   in 

the  "  Bulletin  of  the  Department  of  Labor,"  Washing- 
ton, July,  1900. 


198 


CHAPTER  Vni. 

CAPITALISTIC  MONOPOLIES. 

There  are  at  least  three  chief  classes  of  monopo- 
lies —  monopolies  cine  to  location,  monopolies 
due  to  privilege  and  monopolies  dne  to  the  posses- 
sion and  nse  of  large  capital.  Railways  and 
municipal  monopolies  are  important  monopolies 
of  location.  The  Dutch  monopoly  of  pepper  and 
other  spices  in  the  sixteenth  and  seventeenth  cen- 
turies was  due  to  their  control  of  the  spice  islands 
and  wa^  therefore  a  monopoly  of  location.  The 
Rothschilds'  control  of  the  cinnabar  mines  of  Al- 
maden  in  Spain  and  Idria  in  Austria  formerly 
gave  them  a  practical  monopoly  of  the  sale  of 
quicksilver  throughout  the  world.  An  irrigation 
company  owning  an  exclusive  water-right  in  an 
arid  region  possesses  a  monopoly  of  location.  So 
also  the  owner  of  a  mill  site  or  of  some  other 
favorably  situated  piece  of  land  may  under  cer- 
tain circumstances  possess  a  monopoly  of  location. 

In  early  time  monopolies  of  privilege  were 
more  common  than  they  are  now.  The  monopo- 
lies of  gilds  and  exclusive  trading  companies  were 
founded  on  privileges.  Patents  and  copyrights 
are  modern  examples  of  monopolies  due  to  privi- 
lege, as  are  also  franchises  granted  by  municipal, 
199 


200     MONOPOLIES    PAST   AND    PRESENT. 

state  or  national  governments.  Government 
monopolies  may  in  a  certain  sense  be  called 
monopolies  of  privilege. 

Capitalistic  monopolies  are  those  which  are  due 
chiefly  to  the  power  of  capital.  Monopolies  of 
location  and  of  privilege  cannot  be  rendered  ef- 
fective without  the  use  of  capital,  to  a  greater  or 
less  extent,  but  apart  from  location  and  privilege 
and  apart  from  special  and  extraordinary  ability, 
the  possession  of  large  capital  gives  to  the  owner 
a  standing  and  power  in  the  industrial  world, 
which  is  duo  to  his  wealth  alone.  The  use  of 
large  capital,  combined  with  advantages  of  loca- 
tion and  privilege  and  business  ability  has  pro- 
duced the  greatest  monopoly  of  modern  times  — 
the  Standard  Oil  Company.  This  company  owes 
its  existence  in  part  to  the  possession  of  oilwells 
and  to  its  control  over  railways  and  pipe  lines  and 
is  therefore  a  monopoly  of  location.  It  owns  cer- 
tain patents  and  is  thus  aided  by  monopolies  of 
privilege.  Behind  all  there  is  a  vast  reserve  of 
capital  whereby  a  great  organization  is  supported, 
competition  suppressed  and  commercial  power 
maintained.  For  this  reason  the  Standard  Oil 
Company  may  be  called  a  capitalistic  monopoly. 

The  capitalist  has  always  been  a  man  of  power 
in  the  industrial  world.  By  means  of  his  wealth 
he  has  often  been  able  to  compel  his  poorer  neigh- 
bors to  buy  and  to  sell  at  prices  dictated  by  him. 


CAPITALISTIC  MONOPOLIES.  201 

The  modern  "  corner  "  had  its  prototype  in  an- 
cient times.  The  forestallers  and  engrossers  of 
the  Middle  Ages  well  understood  the  principle  of 
buying  in  the  cheapest  market  and  selling  in  the 
dearest.  The  acrobatic  feats  of  Hutchinson  and 
Leiter  were  not  performed  with  untried  methods 
upon  unexplored  ground.  The  methods  have  al- 
ways been  hazardous  and  the  ground  always  full 
of  pit-falls,  traps  and  snares. 

The  successful  "  corner  "  is  a  temporary  capital- 
istic monopoly.  It  is  monopoly  because  it  involves 
a  certain  control  of  prices.  It  is  capitalistic  because 
it  is  created  by  the  use  of  capital  in  buying  and 
selling.  It  is  temporary  because  it  does  not  in- 
volve the  control  of  the  means  of  production  but 
only  of  the  product  and  because  the  speculator's 
gains  proceed  from  the  dissolution  of  the  corner. 
Every  corner  has  a  period  of  creation  and  a  period 
of  dissolution.  It  is  created  by  buying  and  dis- 
solved by  selling.  The  buying  price  is  the  specu- 
lator's outlay.  The  selling  price  is  his  income. 
The  difference  between  outlay  and  income  consti- 
tute the  profit  or  loss  of  the  undertaking. 

The  speculator  buys  in  order  to  sell.  When 
buying  he  wishes  prices  to  remain  low.  When 
selling  he  desires  high  prices.  Yet  the  effect  of 
large  buying  is  to  raise  prices  and  the  effect  of 
heavy  selling  is  to  cause  them  to  fall.  Herein  lies 
the  difficulty  of  the  problem.    A  corner  can  best 


202  MONOPOLIES   PAST   AND    PRESENT. 

be  engineered  in  a  rising  market  based  upon  an 
actual  or  expected  scarcity,  as  when  the  wheat 
harvest  is  bad.  The  speculator  in  wheat  who  be- 
lieves that  the  price  of  wheat  is  bound  to  rise 
thinks  to  aid  nature  by  a  little  artificial  stimulus. 
He  begins  to  buy.  He  buys  a  million  bushels  at 
sixty  cents,  another  million  at  seventy  cents,  an- 
other at  eighty  cents  and  still  another  at  one 
dollar.  At  that  price  wheat  begins  to  come  from 
distant  lands  and  from  unsuspected  sources  at 
home.  The  price  threatens  to  fall  but  the  specu- 
lator is  confident  that  the  supply  is  limited.  He 
checks  the  decline  by  another  great  purchase.  A 
rise  ensues.  He  buys  again  at  a  dollar-ten.  His 
allies  on  the  exchange  do  the  same.  At  one- 
twenty-five  he  ceases  to  buy  and  awaits  a  favorable 
opportunity  to  sell.  His  stock  is  large.  Perhaps 
he  has  cornered  half  of  the  visible  supply.  While 
he  refuses  to  sell  there  is  a  scarcity.  Other  specu- 
lators, not  knowing  that  the  chief  engineer  has 
ceased  to  buy,  observe  the  scarcity  and  buy  on. 
A  report  of  crop  failures  sends  the  price  to  a 
dollar  fifty  and  even  higher.  Then  the  chief 
operator  proceeds  to.  sell.  He  puts  out  a  feeler  in 
the  shape  of  a  million  bushels.  They  are  sold  at 
the  highest  price  and  the  market  is  unaffected. 
Then  a  few  more  millions  are  offered  for  sale. 
The  market  is  shaken.  He  buys  them  back  and 
the  market  rallies.    Again  he  offers  to  sell  and  dis- 


CAPITALISTIC  MONOPOLIES.  203 

poses  of  half  his  stock  at  the  highest  prices.  An- 
other tremor  of  apprehension.  The  great  specu- 
lator is  selling.  The  smaller  dealers  must  save 
themselves.  They  rush  to  sell.  Xow  is  the  time 
for  Providence  to  intervene.  A  desperate  failure 
of  crops  at  home  and  abroad  would  save  the  situa- 
tion, the  corner  would  be  a  glorious  success  and 
the  speculator's  name  shine  forever  as  an  angel  of 
the  pit.  Providence  is  invoked  but  declines  to  in- 
terfere. There  is  no  ray  of  hope.  Everybody 
wishes  to  sell,  nobody  desires  to  buy.  A  panic  is 
at  hand.  Prices  decline,  fall,  sink.  Disaster  and 
liquidation  prevail.  Wheat  is  at  sixty  cents. 
The  corner  is  no  more. 

Corners  vary  greatly  in  character  and  results, 
but  such  has  been  the  history  of  more  than  one 
corner  in  wheat.  Others  have  had  an  outcome 
more  satisfactory  to  the  "  bulls  "  but  less  pleasing 
to  the  "  bears."  Yet  it  is  difficult  to  obtain  an 
effective  corner  in  a  staple  commodity.  The  capi- 
tal required  is  too  great  and  the  speculator  is  un- 
able to  restrict  production.  The  chief  effect  of 
his  operations  is  to  increase  production  and 
thereby  the  corner  is  destroyed.  This  is  true  also 
of  other  than  staple  commodities.  Without  con- 
trol of  the  means  of  production,  whether  of  the 
raw  or  the  manufactured  product,  it  would  be  im- 
possible to  maintain  corners  in  diamonds,  ivory, 
quinine,  chocolate,  rubber  and  the  like. 


204     MONOPOLIES   PAST   AND   PRESENT. 

The  speculator  has  at  best  a  very  limited  control 
over  the  market  price  of  any  commodity,  no  mat- 
ter how  great  his  capital  nor  how  keen  his 
sagacity.  His  profits  are  to  a  large  extent  de- 
rived from  his  fellow-speculators  and  not  from 
the  general  public.  In  his  case  "  dog  eats  dog." 
The  speculative  control  of  prices  is  of  trifling  mo- 
ment compared  with  the  control  that  is  possible 
when  not  only  the  visible  supply  but  also  the 
source  of  supply  is  in  the  hands  of  a  single  per- 
son or  an  association  of  persons  working  toward  a 
common  end.  Such  an  association  of  capitalists 
is  the  modern  trust. 

The  so-called  trusts  of  the  present  time  are  not 
trusts  at  all  in  the  original  meaning  of  that  word. 
The  original  trust  is  said  to  have  been  formed 
by  the  Standard  Oil  Company  about  the  year 
1882,  when  that  company,  already  refining  nearly 
ninety-five  per  cent,  of  the  petroleum  refined  in 
the  United  States,  united  to  itself  a  number  of 
other  companies  engaged  in  the  production  and 
refining  of  oil.  These  various  companies  handed 
over  their  stocks  to  a  body  of  trustees  who  un- 
dertook the  management  of  the  entire  business 
of  all  the  companies.  The  trustees  issued  trust 
certificates  to  the  shareholders  in  place  of  the 
Burrendered  stock.  Thus  was  formed  the  "  Stand- 
ard Oil  Trust."  This  very  successful  trust  be- 
came the  model  and  type  of  other  combinations 


CAPITALISTIC  MONOPOLIES.  205 

whicli  soon  arose  in  considerable  numbers.  Their 
power  and  success  called  the  attention  of  the  peo- 
ple to  the  dangers  of  monopoly  and  anti-trust 
laws  were  passed  in  several  states,  rendering  ille- 
gal the  particular  form  of  combination  known  as 
a  trust.  In  peaceful  obedience  to  the  letter  of 
the  law  the  Standard  Oil  Trust,  in  the  year  1890, 
voted  to  dissolve.  Since  that  date  it  has  dissolved 
or  has  been  in  process  of  dissolution.  Therefore 
at  the  present  time  it  is  no  longer  a  trvst  but  a 
single  gigantic  corporation,  incorporated  under 
the  laws  of  ISTew  Jersey  with  a  capital  of 
$100,000,000.  Most,  if  not  all,  of  the  other  trusts 
have  been  reorganized  in  a  similar  manner. 

The  word  trust  is  therefore  a  misnomer  but  in 
the  absence  of  a  better  word  it  is  conveniently 
used  to  designate,  in  the  words  of  Professor  I^n- 
ley,  "  Any  large  corporation,  partnership  or  busi- 
ness which  seeks  or  gets  exclusive  or  nearly  ex- 
clusive control  of  the  product  which  it  makes  or 
eells."  The  word  is  even  used  in  a  wider  sense 
than  this  and  corporations  are  called  trusts  when 
the  monopoly  feature  is  entirely  absent.  How- 
ever, a  few  salient  features  characterize  the  trusts 
of  the  present  day.  They  are  generally  the  result 
of  the  combination  or  consolidation  of  a  number 
of  formerly  independent  producers.  They  are  all, 
or  nearly  all,  engaged  in  manufacturing  indus- 
tries.    They  endeavor  as  far  as  possible  to  obtain 


206        moxopolie;!^  past  axd  phesext. 

control  of  product  and  of  prices.  They  are  nearly 
all  corporations  of  immense  resources,  their  capi- 
tal stock  being  seldom  under  $1,000,000,  and  fre- 
quently over  $100,000,000. 

It  is  their  endeavor  to  secure  control  of  product 
and  prices  that  gives  to  the  trusts  their  monopoly 
character.  It  is  nevertheless  true  that  they  often 
fail  in  their  attempt.  Some  trusts  are  not  monop- 
olies at  all.  Others  are  monopolies  at  one  time 
but  not  at  another.  Others  have  the  power  of 
monopoly  in  regard  to  one  class  of  goods  but  not 
in  regard  to  others.  Yet  it  is  not  difficult  to  see 
that  a  certain  amount  of  monopoly  power  has  al- 
ready been  attained  by  the  most  powerful  of  the 
trusts,  that  their  power  is  increasing  and  that  the 
tendency  of  the  time  is  toward  stronger  combina- 
tions and  more  powerful  consolidations. 

The  progress  of  combination  is  so  rapid  that 
statistics  become  erroneous  as  soon  as  they  are 
published.  From  January  1st  to  August  1,  1899, 
no  less  than  121  corporations  were  chartered  in 
New  Jersey,  each  with  a  capital  of  over 
$10,000,000,  in  stocks  and  bonds.  In  March, 
1899,  it  was  estimated  that  there  were  in  the 
United  States  353  combinations,  with  a  total  cap- 
ital of  $5,830,000,000.  The  federal  census  of 
1890  estimated  at  only  $6,525,000,000,  the  total 
amount  of  capital  invested  in  manufactures  in  the 
United  States.     In  December,   1899,  a  list  was 


CAPITALISTIC  MONOPOLIES.  207 

given  by  Charles  S.  Faircliild  of  sixty  of  the 
chief  trusts,  showing  their  capital  to  bo 
$2,318,900,0€0,  or  an  average  of  over  $38,000,- 
000  for  each  trust.  Among  them  may  be  men- 
tioned the  Standard  Oil  Company  with  a  capital- 
ization of  $100,000,000;  the  Amalgamated  Cop- 
per Company  with  $75,000,000;  the  Distilling 
Company  of  America,  $75,000,000;  the  Continen- 
tal Tobacco  Company,  $97,000,000;  the  Ameri- 
can Sugar  Refining  Company,  $37,000,000;  the 
Glucose  Sugar  Refining  Company,  $37,000,000; 
the  American  Bicycle  Company,  $30,000,000; 
the  United  States  Leather  Company,  $130,- 
000,000;  the  International  Paper  Company, 
$48,000,000;  the  Federal  Steel  Company,  $128,- 
000,000;  the  American  Steel  and  Wire  Company, 
$90,000,000,  In  this  list  eight  companies  are 
mentioned  as  engaged  in  the  manufacture  of  iron 
and  steel.  The  capitalization  of  these  eight  com- 
panies aggregates  $486,000,000.  Since  then  pro- 
gress has  been  made  toward  further  combination 
and  the  early  weeks  of  the  twentieth  century  have 
produced  an  effective  plan  of  consolidation  the 
greatest  that  the  world  has  ever  seen.  The  Car- 
negie Steel  Company  is  to  be  amalgamated  with 
seven  other  companies,  the  Federal  Steel  Com- 
pany, the  American  Steel  and  Wire  Company, 
the  National  Tube  Company,  the  National  Steel 
Company,    the    American    Tin    Plate    Company, 


208    MONOPOLIE!^   PAST   AND    PRESENT. 

the  American  Steel  Hoop  Company  and  the 
American  Sheet  Steel  Company.  The  new  com- 
pany has  been  incorporated  under  the  laws  of  Xew 
Jersey  under  the  title  of  The  United  States  Steel 
Corporation,  with  a  nominal  capital  of  $3,000. 
It  is  understood  that  the  total  capitalization  is  to 
be  in  the  neighborhood  of  $1,100,000,000,  in  com- 
mon and  preferred  stock,  or  about  twice  the  capi- 
talization of  all  eight  companies.  This  daring 
project  has  created  a  sensation  in  industrial  circles 
at  home  and  abroad  and  may  be  regarded  as  the 
climax  of  national  consolidation.  It  would  be 
only  a  single  step  to  the  introduction  of  a  ninth 
partner,  the  i^ational  Government  itself. 

It  has  been  claimed  that  the  growth  of  trusts 
has  been  caused  chiefly  by  the  protective  tariff. 
That  this  is  not  the  case  is  shown  by  the  forma- 
tion of  similar  combinations  in  England,  the  home 
of  free  trade,  as  much  as  in  Germany  and  France, 
where  the  policy  of  protection  prevails.  While 
this  is  true  it  cannot  be  denied  that  the  formation 
of  trusts  has  been  aided  by  the  protecting  ^A^ing 
of  the  tariff.  Without  the  tariff  it  would  be  nec- 
essary to  form  a  world  trust  in  order  to  control 
the  world  market.  Under  a  system  of  free  trade 
combinations  would  exist  but  monopoly  could 
hardly  be  established  without  international  com- 
binations, which  it  would  be  difficult  to  form,  yet 
the  savings  due  to  combination  might  enable  trusts 


CAPITALTSTTC  MONOPOLTESi.  200 

in  the  United  States  to  obtain  monopoly  and  price 
control  below  the  level  of  foreign  competition. 
^In  this  case  the  monopoly  control  wonld  be  lim- 
ited, bnt  nevertheless  effective  within  its  limits. 

The  trust  is  the  latest  product  of  industrial  evo- 
lution. It  is  of  recent  origin.  Before  the  days 
of  Hargreaves,  Arkwright,  Crompton,  Cartwright, 
Watt  and  the  other  great  inventors  of  the  eigh- 
teenth century,  manufacturing  industries  were 
usually  carried  on  on  a  very  small  scale.  The 
manufacturer  was  a  master  workman.  The  manu- 
factory was  the  master's  dwelling.  The  laborers 
were  the  members  of  the  master's  family,  assisted 
by  a  few  journejTnen  and  apprentices.  Machines 
were  primitive  and  inexpensive.  Large  capital 
was  not  required.  Crafts  were  organized  into 
gilds,  but  the  gilds  were  municipal  and  not  na- 
tional in  their  extent  and  influence. 

"When  the  new  inventions  were  introduced  the 
industrial  revolution  began.  In  time  the  old  sys- 
tem of  hand  labor,  a  system  as  old  as  human  his- 
tory, was  overthrown.  In  its  place  arose  the  fac- 
tory system  with  its  large  buildings,  its  extensive 
machines,  its  bands  of  workers,  its  employers  and 
overseers.  At  first  the  manufacturer  was  both 
capitalist  and  undertaker  and  the  size  of  the  fac- 
tory was  limited  by  the  extent  of  his  fortune. 
The  addition  of  one  or  more  partners  further  in- 
creased the  possibility  of  expansion.  The  found- 
14 


210     MONOPOLIES   PAST   AND   PRESENT. 

ing  of  joint-stock  companies  rendered  a  still 
greater  extension  possible  but  increased  the  risk 
of  failure.  The  old  joint-stock  companies  were 
established  on  the  basis  of  partnership,  according 
to  which  the  sharchohlors  were  liable  for  the  debts 
of  the  company  to  the  full  extent  of  their  fortunes. 
Under  such  a  system  there  was  little  encourage- 
ment to  outside  investors.  The  chances  of  profit 
might  be  great  but  the  hazard  was  tremendous. 
The  bank  failures  in  Edinburgh  and  Glasgow  in 
the  year  1857  and  the  failure  of  the  City  of  Glas- 
gow Bank  in  1878  were  severe  illustrations  of  the 
working  of  the  principle  of  unlimited  liability. 

Perhaps  nothing  has  contributed  more  to  the 
growth  of  great  business  corporations  than  the  in- 
troduction of  the  principle  of  limited  liability. 
Under  this  principle  a  stockholder  in  a  company 
is  liable  in  case  of  failure  of  the  company  to  the 
amount  of  his  investment,  but  no  further,  except 
in  special  cases.  What  he  has  invested  he  may 
lose,  but  the  rest  of  his  fortune  is  in  no  way  en- 
dangered. Under  this  system  it  is  possible  for  a 
capitalist  to  hold  stock  in  fifty  different  companies, 
which  he  could  not  safely  do,  were  his  entire  for- 
tune to  be  at  stake  in  each  case.  This  principle 
was  first  recognized  by  act  of  the  British  Parlia- 
ment in  the  year  1855.  Since  that  time  it  has 
been  adopted  throughout  the  civilized  world. 
The  growth  of  great  business  corporations  has 


CAPITALISTIC  MONOPOLIES.  211 

also  been  greatly  aided  by  the  growth  of  railways 
and  the  wonderful  development  of  the  telegraph, 
the  telephone,  stenography  and  typewriting. 
These  great  improvements  have  rendered  possible 
a  great  concentration  of  business  and  at  the  same 
time  a  great  expansion.  From  an  industrial  point 
of  view  the  United  States  is  now  no  larger  than 
was  England  in  the  eighteenth  century  and  the 
whole  world  is  no  larger  than  the  Russia  of  that 
century.  By  the  aid  of  these  improvements  the 
power  and  influence  of  the  business  manager  has 
been  increased  many  fold.  He  can  manage  a  capi- 
tal of  ten  millions  with  greater  ease  than  a  capital 
of  one  million  under  the  old  conditions. 

For  all  these  reasons  and  because  of  the  natural 
and  continuous  improvement  in  business  methods, 
the  growth  of  business  corporations  has  been  very 
great,  especially  during  the  past  twenty-five  years. 
With  the  increase  of  the  wealth  and  power  of 
these  corporations  competition  has  become  more 
and  more  severe.  The  small  firms  of  a  few  years 
ago  could  not  safely  enter  into  a  destructive  com- 
petition. They  were  already  producing  at  a  suffi- 
ciently small  margin  and  a  great  reduction  of 
prices  would  have  brought  disaster  to  most  of  the 
competitors  and  a  very  questionable  advantage  to 
those  who  survived.  Therefore  there  was  no  de- 
sire for  war  to  the  knife.  "  Live  and  let  live  "  was 
the    accepted    maxim.       Competition    prevented 


212     MONOPOLIES   PAST   AND    PRESENT. 

prices  from  rising  too  high  but  it  also  prevented 
them  from  falling  too  low.  Economists  in  those 
days  very  properly  spoke  much  of  prices  as  regu- 
lated by  the  cost  of  production.  Small  competi- 
tors could  not  afford  to  sell  below  the  cost  of  pro- 
duction and  then  all  the  competitors  were  small. 
"When  some  of  the  competitors  became  great 
it  was  possible  to  compete  in  a  great  way.  A  firm 
or  corporation  owning  a  large  plant  could  afford 
to  compete  for  an  indefinite  time  on  the  basis  of 
securing  enough  to  pay  for  running  expenses  and 
repairs.  A  corporation  with  a  great  reserve  of 
capital  could  afford  to  compete  for  a  considerable 
time  at  prices  that  would  not  even  pay  for  run- 
ning expenses,  in  the  hope  that  its  weaker  com- 
petitor would  succumb  and  leave  the  field.  This 
was  cut-throat  competition  and  war  to  the  knife. 
As  the  weaker  rivals  left  the  field  and  the  com- 
petitors became  few  in  number  the  competition 
became  more  and  more  severe.  Prices  were  low- 
ered below  the  cost  of  production.  Profits  were 
nothing  and  less  than  nothing.  Such  competition 
could  not  last  and  did  not  last.  Among  rivals 
so  few  in  number  it  was  easy  to  see  that  agree- 
ment was  possible.  Agreements  were  made. 
Prices  were  raised.  It  was  once  more  possible 
to  earn  profits.  But  the  higher  prices  were  set 
the  greater  was  the  temptation  to  underselling. 
Prices  were  cut.    Agreements  were  broken.    War 


CAPITALISTIC  MONOPOLIES.  213 

broke  out  again.  Wise  business  men  soon  saw 
the  evils  of  the  situation  and  the  only  possible 
remedy.  If  two  great  rivals  could  not  slay  one 
another  they  might  make  peace  and  unite  their 
forces  for  a  common  end.  This  was  done  and 
consolidation  was  the  result. 

It  is  not  necessary  to  assert  that  all  trusts  have 
been  formed  in  precisely  the  manner  described, 
but  it  is  safe  to  say  that  the  case  is  typical.  Of 
late  years  many  combinations  have  evidently  been 
formed  in  cold  blood,  without  the  pressure  of  ex- 
treme competition  and  for  the  sake  of  securing 
the  advantages  of  combination  which  others  have 
enjoyed.  Also  some  combinations  have  been 
formed  by  promoters,  for  their  own  ends  and  not 
for  the  good  of  capitalists  or  public.  At  the  same 
time  in  nearly  every  case  there  has  been  much 
competition  and  many  have  fallen  in  the  strife. 
It  is  now  no  longer  possible  for  a  man  of  small 
capital  to  enter  the  field  of  manufacturing,  in  com- 
petitions with  the  great  companies,  with  any  hope 
of  success.  There  may  be  local  exceptions  to  this 
rule  but  they  are  few  and  insignificant,  for  the 
day  of  the  small  producer  is  past  and  gone. 

Trusts  are  formed  for  the  purpose  of  securing 
greater  profits  than  could  be  obtained  without 
combination.  They  are  not  philanthropic  institu- 
tions. ITeither  are  they  primarily  designed  to  do 
evil  in  the  world.     They  exist  for  the  sake  of 


214  MONOPOLIES    PAST   AND    PRESENT. 

dividends  and  for  that  alone.  The  advantages  of 
combination  are  many.  Production  is  carried  on 
on  a  large  scale.  The  sa%'ing  thereby  effected  is 
very  great.  The  cost  of  production  is  greatly  low- 
ered. There  is  a  saving  in  rent  and  in  expendi- 
ture for  buildings  and  machinery.  "  When  the 
whiskey  trust  was  formed,"  says  Professor  Jenks, 
"  twelve  distilleries  running  to  the  full  extent  of 
their  capacity  produced  as  much  as  eighty  distil- 
leries had  produced  before,  when  owing  to  over- 
production they  had  limited  their  output."  When 
trusts  are  formed  it  is  common  to  close  a  con- 
siderable number  of  factories  and  to  carry  on  the 
work  of  production  in  a  limited  number  of  fac- 
tories favorably  situated  and  running  at  their  full 
capacity.  The  land  and  buildings  thus  left  idle 
can  often  be  sold  and  the  proceeds  turned  in  more 
profitable  directions,  but  if  not  there  is  at  least  no 
unnecessary  expense  of  maintenance. 

There  is  a  corresponding  saving  in  cost  of  man- 
agement. Where  there  are  fifty  independent  fac- 
tories, each  must  have  its  independent  organiza- 
tion, with  manager  and  staff  of  clerks.  When 
these  fifty  factories  are  replaced  by  twenty,  all 
under  a  single  system,  a  smaller  staff  is  required 
and  a  greater  amount  of  work  is  done.  Better 
salaries  can  be  paid  and  a  higher  degree  of  skill 
secured.  There  is  a  corresponding  saving  in  the 
cost  of  labor.     When  a  trust  is  formed  it  is  com- 


CAPITALISTIC  MONOPOLIES.  215 

mon  for  a  number  of  men  to  be  dismissed,  for 
under  the  new  system  fewer  men  can  do  the  work. 
Every  laborer  employed  is  worth  more  to  the  com- 
pany than  he  was  before.  As  the  business  is  in- 
creased more  laborers  are  employed,  but  the  pro- 
duct is  more  than  correspondingly  increased. 

Another  notable  saving  is  due  to  a  change  in  the 
methods  of  advertising.  The  competitive  system 
is  notoriously  wasteful  in  this  regard.  Unneces- 
sary and  expensive  buildings  are  used  to  attract 
the  public  eye.  Advertisements  in  the  public 
prints,  by  the  wayside,  on  trees,  monuments  and 
mountains,  all  over  the  world,  at  a  cost  of  millions 
of  dollars  every  year,  are  thought  to  be  necessary 
to  call  the  attention  of  an  ignorant  public  to  the 
necessity  of  using  soap  and  patent  medicines.  Peo- 
ple would  use  soap  without  advertising,  and  they 
could  dispense  with  patent  medicines.  Most  of 
the  money  spent  in  advertising  is  to  be  regarded  as 
social  waste.  It  could  be  saved,  but  only  under 
a  system  of  consolidation.  The  Standard  Oil  Com- 
pany does  not  need  to  advertise,  at  least  not  in 
the  usual  way. 

Commercial  travelers  are  not  as  numerous  as 
formerly.  They  will  be  still  less  numerous  in  the 
future.  When  five  "  drummers  "  visit  five  towns 
in  the  interest  of  five  different  chemical  compa- 
nies, four  of  those  "  drummers  "  may  be  said  to 
be  wasting  their  time,  although  they  draw  large 


216     MONOPOLIES    PAST   AND    PRESENT. 

salaries  and  ride  in  parlor  cars.  When  these  five 
companies  are  merged  into  the  General  Chemical 
Co.,  with  a  capital  of  $25,000,000,  a  single  agent 
can  do  the  work  of  his  five  predecessors  more 
efficiently  and  in  a  shorter  time.  Of  ten  insurance 
agents  who  spend  anxious  hours  on  the  "  life  "  of 
one  unfortunate  "  risk,"  nine  of  those  agents  could 
serve  humanity  better  if  some  other  sphere  of  ac- 
tivity were  opened  to  them.  When  a  trust  is  estab- 
lished commercial  travelers  and  middle-men  of 
all  sorts  are  eliminated.  Wholesale  dealers  are 
no  longer  indispensable.  Producer  and  consumer 
are  brought  closer  together  than  ever  before.  The 
salaries  and  profits  of  these  middle-men  are  saved. 
The  anarchy  of  production  and  distribution  is  over- 
come. 

That  comparative  anarchy  prevails  in  many  de- 
partments of  industry  is  a  well-known  fact  and 
one  much  dwelt  upon  by  socialists.  Every  morn- 
ing a  dozen  milk  carts  visit  one  small  city  street 
and  a  few  hours  later  they  all  visit  another  small 
street  five  miles  away.  A  great  saving  could  be 
made  in  this  respect  by  the  institution  of  a  milk 
trust.  An  ice  trust  is  justifiable  on  the  same 
grounds.  The  department  store  is  an  illustration 
of  the  advantages  of  unity  and  system  in  the  re- 
tail business  and  promises  further  development 
along  the  same  line. 

When  fifty  cotton  factories  unite   to  form  a 


CAPITALISTIC  MONOPOLIES.  217 

trust  it  is  possible  for  each  to  devote  itself  to  the 
production  of  its  own  specialties,  instead  of  at- 
tempting to  supply  the  market  with  many  kinds 
of  goods.  While  these  factories  are  independent  it 
is  necessary  for  each  to  maintain  a  heavy  insur- 
ance against  losses  by  fire.  When  they  are  united 
into  a  great  trust  with  a  capital  of  many  millions 
it  is  possible  to  dispense  with  insurance  by  prac- 
ticing a  system  of  self -insurance,  thereby  effecting 
a  great  saving  every  year.  When  a  single  factory 
is  destroyed  the  loss  is  but  one-fiftieth  of  the  en- 
tire property,  and  by  no  means  disastrous. 

All  the  other  savings  due  to  production  on  a 
large  scale  accrue  to  the  trust.  The  utilization  of 
the  by-products  of  the  meat-packiiig  industry  is  a 
wonderful  example  of  economy  in  production. 
The  by-products  of  some  great  industries  have  be- 
come as  important  as  the  original  products.  Sub- 
sidiary processes  also  can  be  carried  on  under  the 
general  management  wdth  considerable  success. 
A  great  establishment  can  have  its  own  electric 
lighting  plant,  its  own  machine  shop,  its  own  car- 
penters, blacksmiths  and  plumbers.  There  is  here 
no  saving  in  w^ages,  but  the  profits  that  would 
otherwise  go  to  independent  contractors  now  ac- 
crue to  a  single  great  employer.  When  there  is 
need  of  new  and  expensive  machinery  a  great  firm 
can  introduce  it  at  once  and  thus  take  speedy  ad- 
vantage   of    new    and    improved    processes    and 


218     MONOPOLIES    PAST   AND    PRESENT. 

methods.  If  railway  discrimination  prevails  the 
largest  shipper  can  get  the  lowest  rates.  It  is 
very  difficult  for  the  small  producer  under  such 
circumstances  to  compete. 

The  risk  incident  to  production  is  greatly  les- 
sened by  the  formation  of  a  trust.  A  small  inde- 
pendent producer  cannot  accurately  foretell  the 
conditions  of  the  market.  He  cannot  know  just 
when  to  increase  his  output  or  when  to  diminish 
it.  His  decisions  in  this  regard  are  to  a  large  ex- 
tent like  a  leap  in  the  dark.  The  venture  may 
prove  a  success  or  it  may  be  a  disastrous  failure. 
Periods  of  under-production  and  of  over-produc- 
tion are  common.  When  there  is  under-produc- 
tion and  prices  are  high  every  manufacturer  seeks 
to  take  advantage  of  the  favorable  conditions  and 
new  companies  are  started  to  share  in  the  profits. 
There  is  no  cooperation,  no  agreement.  Presently 
the  market  is  glutted  with  goods,  prices  fall,  fail- 
ures are  many.  Then  it  is  that  producers  see  the 
necessity  of  combination  for  their  own  good  and 
for  the  stability  of  business  in  general.  They 
combine  to  form  as  large  a  trust  as  possible.  Then 
they  observe  the  conditions  of  the  market.  If  pro- 
duction has  been  too  great  and  if  prices  are  too 
low  to  bring  in  an  adequate  profit,  they  close  some 
of  their  mills  for  a  time  and  even  permanently. 
When  the  supply  is  diminished  and  prices  rise  the 
trust  begins  to  pay  dividends.      As  demand  in- 


CAPITALISTIC  MONOPOLIEfi.  219 

creases  the  supply  is  gradually  and  cautiously  in- 
creased. There  may  be  still  danger  of  over- 
production but  the  danger  is  not  so  great.  It  has 
been  reduced  to  a  minimum.  It  has  become  pos- 
sible to  predict  the  condition  of  the  market.  When 
prediction  is  possible  industry  becomes  scientific 
and  mathematical.  Failures  are  diminished,  pan- 
ics avoided,  stability  insured. 

It  is  therefore  possible  to  borrow  at  low  rates 
of  interest.  A  business  man  with  large  capital  and 
doing  business  chiefly  on  a  cash  basis  is  able  to 
borrow  at  low  rates,  but  when  to  these  advantages 
there  is  added  a  practical  control  of  the  market, 
the  rates  of  interest  will  be  the  lowest  possible, 
for  the  risk  will  be  at  the  lowest  possible  point. 
Were  it  not  for  the  mistakes  of  capitalists,  the  sins 
of  promoters,  and  the  uncertainties  of  legislation, 
"industrial  "  securities  would  be  among  the  best 
in  the  financial  market.  Even  now  "  industrials  " 
of  the  first  class  are  excellent  investments  for  large 
and  small  capitalists  and  it  is  to  be  hoped  that 
there  will  be  a  great  improvement  as  time  goes  on. 
It  is  highly  desirable  that  openings  be  found  for 
the  safe  and  profitable  investment  of  small  capital. 

The  late  enormous  expansion  of  the  foreign 
commerce  of  the  United  States  has  doubtless  been 
due  to  a  considerable  extent  to  the  magnificent  or- 
ganization of  the  trusts.  Such  immense  capital  so 
thoroughly  organized  cannot  but  prove  a  power  in 


220     MOXOPOLIES    PAST    AND    PRESENT. 

the  markets  of  the  world.  In  order  to  compete 
on  equal  terms  it  will  be  necessary  for  English, 
German  and  French  manufacturers  to  organize 
themselves  in  a  similar  way.  They  have  already 
begun  to  do  this,  for  no  country  can  afford  to  turn 
back  from  the  way  of  progress.  To  insist  on  a 
return  to  the  competitive  system  would  be  to  yield 
the  field  to  foreign  rivals.  This  will  not  be  done. 
In  opposition  to  the  many  advantages  of  the 
trust  system  there  are  two  chief  disadvantages. 
On  the  one  hand  the  system  is  in  danger  of  be- 
coming too  complex,  on  the  other  it  is  difficult  to 
find  business  men  of  sufficient  ability  to  carry  on 
the  great  enterprises  of  recent  times.  It  is  true 
that  the  system  is  complex,  but  it  is  equally  true 
that  it  is  a  system.  Individual  and  competitive 
production  is  even  more  complex  and  it  is  not  a 
system  in  any  strict  sense  of  the  word.  It  is 
rather  organized  anarchy.  In  its  parts  it  is  organ- 
ized, as  a  whole  it  is  anarchy.  There  is  no  central 
motive  power  and  no  central  controlling  force.  It 
is  difficult  for  an  individual  to  adjust  himself  to 
his  variable  surroundings  and  hazardous  for  him 
to  attempt  to  do  so.  A  pilot  of  great  skill  is  re- 
quired to  steer  a  ship  in  stormy  seas,  amid  reefs 
and  derelicts.  When  the  sea  is  calm  and  the  trade 
winds  blow,  an  ordinary  sea-captain  can  do  all  that 
is  required  of  him.  The  duties  of  the  captain  of 
a  great  Atlantic  liner  are  not  as  arduous  and  com- 


CAPITALISTIC  MONOPOLIES.  221 

plex  as  the  multiform  duties  of  the  skipper  of  a 
coasting  schooner.  The  modern  sea-captain  is  sci- 
entifically trained  and  highly  efficient,  yet  it  is  not 
difficult  to  find  men  capable  of  doing  the  work  that 
must  be  done.  Without  pushing  the  analogy  too 
far,  it  is  safe  to  say  that  the  world  will  never  lack 
men  capable  of  adapting  themselves  to  the  exigen- 
cies of  a  new  and  changing  environment.  As  long 
as  business  undertakings  are  to  be  made,  undertak- 
ing genius  will  be  developed.  The  mind  that  is 
able  to  devise  a  workable  machine  will  be  able  to 
run  that  machine. 

The  industrial  machine  is  capable  of  running  it- 
self for  a  considerable  time  in  the  absence  of  the 
directing  intellect.  A  department  store  does  not 
collapse  when  the  manager  is  absent.  The  system 
is  so  perfect  that  it  goes  on  of  its  own  accord  and 
there  are  always  subordinate  members  of  the  staff 
who  can  take  the  principal's  place  for  a  time,  and 
if  need  be,  permanently.  So  it  is  with  those  larger 
enterprises  known  as  trusts.  They  are  managed 
by  men  highly  skilled,  scientifically  trained,  who 
are  the  product  of  the  environment  they  have  pro- 
duced and  who  show  no  signs  of  incapacity  but 
who  show  themselves  quite  able  to  grapple  with 
new  problems  as  they  present  themselves  for 
solution. 

From  the  point  of  view  of  economical  produc- 
tion, it  is  probably  correct  to  say  that  the  advan- 


222  MONOPOLIES  PAST  AND   PRESENT. 

tages  of  production  on  a  large  scale,  according  to 
the  methods  of  the  modern  trust,  greatly  outweigh 
the  disadvantages  of  that  system.  The  cost  of 
production  is  greatly  lessened  and  thereby  a  great 
saving  is  effected.  This  saving  may  accrue  to  the 
benefit  of  the  employer,  of  the  wage-earner,  or  of 
the  consumer,  or  to  the  benefit  of  all  the  parties 
concerned.  In  other  words,  the  saving  may  go  to 
increase  profits,  or  to  increase  wages  and  shorten 
the  hours  of  labor,  or  to  diminish  prices  and  im- 
prove the  quality  of  goods,  or  all  three  effects  may 
be  produced. 

It  is  no  doubt  true  that  a  successful  trust  can 
lower  prices  if  it  wall,  and  that  if  it  "vvill  it  can  im- 
prove the  condition  of  the  wage-earners  by  increas- 
ing their  wages  and  by  diminishing  their  hours  of 
labor.  If  it  is  true  that  the  trust  system  does 
not  thus  benefit  consumers  and  wage-earners,  who 
constitute  the  vast  majority  of  the  population  of 
any  country,  then  it  is  a  problem  for  the  people 
and  the  lovers  of  the  people  to  solve — how  can  the 
trusts  be  made  to  serve  the  public  good  by  divid- 
ing with  the  public  the  benefits  of  industrial 
progress? 

Before  considering  the  possible  solutions  of  this 
problem  it  may  be  well  to  notice  the  evils  that  are 
incident  to  industrial  progress  as  represented  by 
the  growth  and  development  of  trusts.  That  cer- 
tain evils  exist  cannot  be  denied,  though  it  may 


CAPITALISTIC  MONOPOLIES.  223 

be  claimed  that  they  are  of  minor  importance  and 
evils  which  necessarily  accompany  industrial  prog- 
ress of  any  kind.  A  trust  is  not  built  up  without 
the  destruction  of  many  competitors.  In  the  pe- 
riod of  fierce  competition  which  generally  precedes 
the  formation  of  a  trust  many  producers  are  com- 
pelled to  retire  from  the  field.  They  withdraw 
from  business  before  their  reserve  of  capital  is 
all  gone  or  they  continue  to  fight  until  the  day  of 
failure  and  defeat.  Then  they  disappear.  It  is 
hard  to  say  what  becomes  of  them.  If  they  are 
young  men  they  may  find  employment  in  the  ser- 
vice of  their  successful  rivals,  or  they  may  enter 
some  other  fields  of  business.  If  they  are  past 
the  age  of  activity  their  lot  is  hard  to  bear.  In 
their  disappointment  they  are  apt  to  reflect  with 
bitterness  upon  the  methods  employed  to  destroy 
their  trade.  Competition  has  been  unfair.  Prices 
have  been  lowered  to  a  point  far  below  the  cost  of 
production  and  their  slender  capital  could  not 
stand  the  strain.  Railways  have  discriminated 
against  them.  Their  competitors  have  received 
secret  rates  contrary  to  the  law  of  the  land.  Leg- 
islators have  been  bribed.  Even  judges  have  been 
corrupted.  The  whole  process  has  been  stained  by 
cruelty  and  iniquity.  The  successful  speak  of  the 
survival  of  the  fittest.  The  only  fitness  that  dis- 
tinguishes them  from  those  who  have  perished  is 
their  ability  to  command  unlimited  capital,  to  ob- 


224  MONOPOLIES   PAST   AND    PRESENT. 

tain  unfair  rates  and  unjust  legislation.  Their  fit- 
ness is  on  a  par  with  the  fitness  of  highwaymen 
and  burglars.  They  survive  because  they  are 
strong  and  unscrupulous. 

Such  are  the  reflections  of  the  fallen  com- 
petitor, the  man  who  has  not  survived.  He 
is  apt  to  forget  that  he  has  been  slain  with 
his  own  weapons,  that  he  would  gladly  have 
conquered  by  the  same  means  had  he  been  able  to 
use  them  effectively.  He  forgets  that  his  rivala 
have  to  a  large  extent  been  forced  to  employ  these 
methods  by  conditions  of  business  and  defects  of 
law.  He  does  not  see  that  in  the  main  the  large 
producer  has  survived  because  he  has  been  able  to 
serve  the  public  in  a  more  eflicient  way  and  that 
the  days  of  the  small  producer  are  numbered. 
Sooner  or  later  the  small  producer  must  die  for 
his  country  and  the  large  producer  must  live,  but 
he  must  not  forget  that  he  is  to  live  for  his  coun- 
try. The  small  producer  falls  and  the  car  of  prog- 
ress rolls  on. 

Again  it  is  said  that  trusts  often  obtain  control 
over  prices,  causing  them  to  rise  and  fall  at  will, 
exercising  thereby  the  full  powers  of  monopoly. 
On  this  point  sufficient  evidence  has  not  been  col- 
lected, but  such  as  there  is  indicates  pretty  clearly 
that  trusts  do  control  prices  to  a  limited  extent. 
They  cause  them  to  fall  when  they  will,  they  often 
keep  them  from  falling,  and  at  times  they  cause 
them  to  rise  to  a  greater  or  less  extent  above  the 


CAPITALISTIC  MONOPOLIES.  225 

level  that  would  have  been  fixed  by  competition. 
As  we  have  seen,  a  period  of  extreme  competition 
often  precedes  the  formation  of  a  trust  and  a  trust 
is  generally  formed  to  restore  prices  to  what  is 
considered  a  fair  level.  The  formation  of  trusts 
is  succeeded  by  a  rise  in  prices,  or  at  least  prices 
are  prevented  from  further  decline.  As  President 
Andrews  has  shown,  before  the  formation  of  the 
Standard  Oil  Trust,  the  price  of  oil,  both  crude 
and  refined,  fell  very  rapidly.  During  the  few 
years  immediately  following  the  formation  of  the 
trust  there  was  a  slight  decline.  Since  that  time 
there  has  been  practically  no  decline  at  all.  Be- 
sides this,  the  price  of  oil  has  varied  greatly  in  dif- 
ferent parts  of  the  United  States,  showing  a  varia- 
tion greater  than  would  naturally  be  due  to  A^ary- 
ing  freight  rates.  Mr.  Lloyd  has  shown  that  the 
Standard  Oil  Company  has  exercised  the  powers 
of  monopoly  in  the  control  of  prices  at  many  times 
and  in  many  places  and  there  can  be  little  doubt 
that  these  powers  are  still  exercised.  Prof.  Ely 
says, —  "  A  statistical  investigation  of  monopoly 
prices  suggests  itself  but  we  have  no  body  of  sta- 
tistics bearing  upon  this  question  sufficiently  large 
and  accurate  to  tell  us  all  that  we  would  like  to 
know.  We  may,  however,  say  that  such  researches 
as  we  have  had  indicate  that  in  the  case  of  monop- 
oly prices  of  all  important  articles  and  services,  the 

price  which  will  yield  the  largest  net  returns  is  far 
15 


226     MOXOPOLIES   PAST   AND    PRESENT. 

higher  than  the  competitive  price,  in  cases  where 
it  is  possible  to  have  a  truly  competitive  price." 
Prof.  Jenks  says, —  "  While  the  trusts  and  com- 
bines have  it  in  their  power  to  make  profits  at 
somewhat  lower  rates  of  prices  than  would  be  pos- 
sible under  free  competition,  they  neA^erthelesa 
have  probably  checked  the  slightly  normal  de- 
crease in  prices  that  comes  with  increasing  facili- 
ties for  manufacturing."  This  cautious  statement 
is  equivalent  to  the  assertion  that  the  trusts  could 
lower  prices  but  prefer  not  to  do  so  to  any  great 
extent.  It  is  also  probably  true  that  the  trusts 
could  raise  prices  but  that  they  often  prefer  not 
to  do  so. 

The  statistics  collected  by  Professor  Jenks  and 
published  in  the  Bulletin  of  the  Department  of 
Labor  for  July,  1900,  would  seem  to  justify  more 
definite  conclusions.  The  combinations  investi- 
gated have  sho^vn  themselves  able  to  control  prices 
to  a  considerable  extent  and  during  a  considerable 
period  of  time.  In  some  cases  there  has  been  a 
fall  in  price  of  the  finished  commodity  but  this 
has  usually  been  the  result  of  a  fall  in  price  of 
raw  materials  and  the  difference  between  these, 
representing  the  cost  of  production  and  the  pro- 
ducer's net  profit,  has  usually  been  greater  under 
strict  combination  than  under  the  influence  of  com- 
petition. For  instance,  in  November,  1887,  just 
before    the    formation    of    the    sugar   trust,    the 


CAPtTALtSTIG  MONOPOLIES.  227 

price  of  granulated  sugar  was  6.G30  cents  per 
pound  and  the  price  of  raw  sugar  was  5.937 
cents,  leaving  a  difference  of  .693  cent  per 
pound  to  cover  cost  of  production  and  pro- 
ducer's profit.  In  December  of  the  same  year, 
just  after  the  formation  of  the  combination,  the 
price  of  granulated  sugar  was  6.875  cents  and  the 
price  of  raw  sugar  5.940  cents,  leaving  a  margin 
of  .935  cents  per  pound."  In  January,  1888, 
granulated  sugar  stood  at  7.125  cents  and  raw 
sugar  at  5.950  cents,  leaving  a  margin  of  1.175 
cents.  During  ten  years  thereafter  the  producer's 
margin  seldom  fell  below  eight-tenths  of  a 
cent  per  pound  and  during  half  of  that  time 
it  was  over  one  cent  per  pound.  In  Sep- 
tember, 1898,  "  active  competition  sprung  up 
again,  especially  on  the  part  of  the  Arbuckle 
and  Doscher  refineries.  The  margin  again  im- 
mediately dropped  back  to  the  neighborhood 
of  50  cents  per  hundred  pounds  and  has  re- 
mained low  from  the  beginning  of  this  active  com- 
petition until  the  present  time." 

Similar  figures,  giving  the  prices  of  white  lead, 
petroleum,  spirits,  lager  beer,  tin  plates  and  other 
commodities,  appear  to  show  pretty  conclusively 
that  the  prices  of  these  articles  have  been  con- 
trolled by  combinations  to  the  extent  of  securing 
a  greater  margin  of  profit  than  it  was  possible  to 
obtain   when   competition    was   active   and   unre- 


228     MONOPOLIES   PAST   AND    PRESENT. 

strained.  Yet  in  no  case  have  prices  been  very 
greatly  raised.  When  prices  are  raised  sales  usu- 
ally diminish,  and  it  is  often  more  profitable  to  sell 
much  at  lo^v  prices  than  to  sell  less  at  higher  prices. 
During  the  period  of  commercial  depression  that 
followed  the  panic  of  1893  it  would  not  have  been 
wise  for  the  trusts  to  have  caused  prices  to  rise 
nor  to  have  tried  to  keep  them  from  falling.  The 
conditions  of  business  were  such  that  the  people 
felt  obliged  to  restrict  their  consumption,  and  had 
prices  not  been  low  the  volume  of  business  would 
have  been  much  less  than  it  was.  Since  that  time 
the  trusts  have  been  ready  to  take  advantage  of 
a  revival  in  business.  When  the  revival  came 
prices  rose  because  of  increased  demand^  and  both 
trusts  and  independent  producers  reaped  a  rich 
harvest.  It  may  be  that  the  prices  of  iron  and 
steel  and  other  commodities  largely  under  trust 
control  have  been  raised  above  the  natural  market 
level,  because  of  the  power  of  the  trusts  but  it  is 
impossible  to  determine  the  extent  of  such  an  in- 
fluence although  there  is  reason  to  think  that  it 
has  been  exercised.  At  the  present  time  prices  are 
falling  to  a  more  natural  level,  and  the  trusts 
either  cannot  or  will  not  prevent  the  decline.  It 
must  be  remembered  that  most  of  the  trusts  have 
not  yet  attained  the  position  of  complete  monopo- 
lists and  that  we  do  not  know  what  they  will  do 
when  they  obtain  complete  control. 


CAPITALISTIC  MONOPOLIES.  229 

It  is  frequently  stated  that  when  trusts  obtain 
control  over  prices  thej  are  also  able  to  control 
the  quality  of  their  goods,  with  the  result  that 
the  quality  is  deteriorated  and  thereby  a  double 
gain  is  secured.  This  may  be  true  in  some  cases. 
In  others  the  opposite  is  true  and  a  decided  im- 
provement in  quality  results  from  the  establish- 
ment of  monopoly  in  place  of  competition.  It  is 
well  kno'UTi  that  the  pressure  of  competition  often 
tends  strongly  toward  deterioration  in  the  qual- 
ity of  goods.  The  trusts  claim  to  supply  a  good 
article  at  a  fair  price. 

Trusts  are  able  to  some  extent  to  control  the 
price  of  articles  which  they  buy.  The  packing 
companies  of  Chicago  have  at  times  exerted  a 
depressing  influence  on  the  price  of  live-stock  in 
the  West.  Trusts  have  been  known  to  be  able 
to  compel  railways  to  grant  them  special  and  se- 
cret rates.  It  is  more  difiicult  for  an  inventor  to 
obtain  a  high  price  for  his  invention  when  the 
industry  concerned  is  controlled  by  a  trust.  In 
general,  trusts,  like  independent  producers,  en- 
deavor by  every  means  in  their  power  to  lower 
the  prices  of  the  things  they  buy  and  to  raise  the 
prices  of  the  things  they  sell  and  it  cannot  be 
doubted  that  they  have  many  opportunities  of  so 
doing. 

It  is  generally  supposed  that  trusts  exert  a  sim- 
ilar influence  over  the  price  of  labor,  with  the 


230  MONOPOLIES   PAST   AND    PRESENT. 

result  of  keeping  wages  down,  yet  it  seems  that 
higher  wages  are  paid  bj  great  companies  than, 
by  small  ones  and  that  there  has  been  no  marked 
fall  in  wages  since  the  development  of  the  great 
trusts.  The  employees  of  the  great  railway  com- 
panies are  paid  higher  wages  than  were  formerly 
paid  by  the  smaller  roads.  The  Standard  Oil 
Company  pays  good  wages.  The  great  iron  and 
steel  companies  pay  wages  according  to  a  sliding 
scale  that  varies  with  the  price  of  the  commodities 
produced.  The  cotton  companies  of  Canada  pay 
higher  wages  than  formerly. 

The  somewdiat  favorable  condition  of  labor  un- 
der the  trusts  may  be  due  to  the  fact  that  highly 
paid  labor  is  efficient  labor,  and  that  the  trusts 
understand  this  principle,  or  it  may  be  due  to  the 
increased  demand  for  labor  that  has  resulted  from 
the  increase  of  production  to  supply  the  home 
and  foreign  markets.  Besides,  it  must  be  remem- 
bered that  side  by  side  with  the  organization  of 
trusts  goes  the  organization  of  labor.  The  iron 
works  of  Youngstown,  Ohio,  may  be  under  a  single 
management,  but  the  iron-workers  also  have  an 
organization  and  are  well  able  to  insist  on  recog- 
nition and  on  respectful  consideration  of  all  rea- 
sonable demands.  It  would  be  difficult  for  a  trust 
to  low^er  the  wages  of  its  employees  while  earning 
immense  dividends,  and  under  such  circumstances 
it  would  be  hard  to  refuse  to  grant  an  increase  in 


CAPITALISTIC  MONOPOLIES.  231 

wages.  As  the  trade  unions  become  stronger  and 
more  thoroughly  organized  it  will  be  possible  for 
them  to  compete  with  the  trusts  on  almost  equal 
terms,  especially  by  the  aid  of  the  law  and  per- 
haps with  the  help  of  compulsory  arbitration.  In 
this  way  the  advantages  of  large  scale  productions 
will  be  divided  betw^een  the  parties  concerned  in 
production  and  since  the  consumers,  excluding 
idlers,  are  the  same  people  in  another  capacity, 
the  question  of  prices  may  be  left  to  work  out  its 
own  solution. 

The  creation  of  trusts  no  doubt  involves  a  seri- 
ous disturbance  to  industry.  Competitors  are  ru- 
ined. Employees  are  dismissed.  When  the  sugar 
trust  was  formed  seven  or  eight  refineries  were 
closed,  throwing  out  of  employment  about  six 
thousand  men.  Some  of  these  may  have  found 
employment  in  the  remaining  refineries,  but 
many  of  them  must  have  been  compelled  to  seek 
other  means  of  livelihood.  In  addition  to  these 
evils,  which  have  always  accompanied  the  intro- 
duction of  improved  methods,  wdiile  society  has 
been  benefited  in  the  long  run,  there  are  other 
causes  of  disturbance  which  are  neither  necessary 
nor  beneficial.  Among  these  are  the  methods 
used  by  unscrupulous  promoters,  which  are  calcu- 
lated to  deceive  the  public  and  to  work  injury  to 
the  industries  concerned.  Prominent  men  are 
paid  to  become  directors  of  companies  whereof 


'232  MONOPOLIES    PAST   AND    PRESENT. 

they  know  nothing.  Legislators  are  bribed,  mil- 
lions of  fictitious  capital  are  issued,  based  on  noth- 
ing but  the  hope  of  monopoly  profits  which  may 
never  materialize.  Dividends  are  paid  out  of 
capital.  Stocks  are  manipulated  for  speculative 
purposes  and  to  deceive  the  uninstructed  in- 
vestor. 

These  are  real  evils,  but  they  are  limited  in 
their  effects.  The  financial  world  is  not  long  de- 
ceived. Capitalists  decline  to  invest.  Banks  re- 
fuse credit.  The  false  industrials  disappear  from 
the  market.  The  true  industrials,  those  based 
upon  real  values  and  sound  financiering,  prove 
their  claims  and  maintain  their  position.  There 
may  be  danger  of  an  over-issue  of  new  industrial 
securities  and  a  consequent  period  of  speculation, 
followed  by  panic  and  collapse,  but  the  danger  is 
surely  not  as  great  as  it  would  be  under  the  com- 
petitive system.  Production  is  likely  to  be  re- 
stricted, rather  than  increased,  and  there  is  no 
expectation  of  fabulous  dividends  such  as  were 
promised  by  the  South  Sea  Company  of  the  eigh- 
teenth century  or  the  South  African  mines  of 
more  recent  times.  On  the  contrary,  the  investing 
public  is  rather  afraid  of  the  new  industrials  and 
will  not  plunge  into  wild  speculation,  unless  the 
financial  prospects  of  the  trusts  grow  much 
brighter  and  the  danger  of  legislative  interference 
become  very  much  less.     It  is  therefore  probable 


CAPITALISTIC  MONOPOLIES.  233 

that  trusts  will  continue  to  be  formed  without 
any  disastrous  effects  upon  the  industrial  and 
financial  world  and  that  under  the  new  system 
periods  of  panic  and  extreme  depression  will  be 
less  frequent  than  heretofore. 

Even  though  it  may  be  admitted  that  the  trusts 
have  not  in  the  long  run  caused  prices  to  rise, 
but  have  rather  allowed  them  to  fall,  it  must  bo 
observed  that  many  of  the  capitalists  who  stand 
at  the  head  of  the  great  trusts  have  amassed  enor- 
mous fortunes.  Great  savings  have  been  effected 
by  means  of  modern  methods  of  production,  but 
the  lion's  share  seems  to  have  gone  to  the  capital- 
ist and  not  to  the  people  at  large.  The  capitalist 
has  retained  enough  to  compensate  him  for  his 
expenditure  of  capital,  his  activity  of  brain  and 
the  risk  to  his  health  and  fortune.  When  a  single 
person  is  able  in  the  course  of  thirty  years  to 
amass  a  fortune  of  $150,000,000  or  more,  it  must 
be  evident  that  he  has  not  permitted  the  price  of 
the  commodities  produced  under  his  control  to 
fall  much  below  the  cost  of  production.  On  the 
contrary,  there  must  have  been  a  comfortable  and 
living  margin  between  the  cost  of  production  and 
the  selling  price.  Dividends  must  have  been  high. 
They  are  still  high  in  many  cases.  Professor  Par- 
sons has  shown  that  the  Western  Union  Telegraph 
Company  has  paid  dividends  in  a  single  year  more 
than  equal  to  the  entire  capital  invested.      He 


234  MONOPOLIES   PAST   AND   PRESENT. 

maintains,  and  with  much  reason,  that  at  the  pres- 
ent time,,  when  a  di\'idend  of  six  per  cent,  is  paid 
on  a  capital  stock  of  over  $100,000,000,  this  divi- 
dend is  equivalent  to  at  least  thirty  per  cent,  on 
an  original  investment  of  less  than  $20,000,000. 
The  quarterly  dividend  of  the  Standard  Oil  Com- 
pany paid  in  March,  1900, consisted  of  the  "regular 
dividend  "  of  three  per  cent.,  together  with  "  an 
extra  cash  dividend"  of  $17,000,000,  making  a 
total  of  $20,000,000  paid  in  a  single  quarter  on 
a  capital  .stock  of  $100,000,000.  The  dividend 
for  the  year  1899  was  thirty-three  per  cent.  No 
wonder  that  the  market  value  of  this  stock  is  over 
$700,000,000  and,  according  to  "  The  Outlook," 
"  exceeds  the  market  value  of  all  the  farms  in 
South  Carolina,  Georgia,  Florida,  Alabama,  Mis- 
sissippi and  Louisiana." 

Other  illustrations  could  be  given  from  the  his- 
tory of  the  sugar  industry,  the  steel  industry  and 
the  like,  to  show  that  dividends  have  been  high 
and  that  great  fortunes  have  been  made.  Is  it 
unreasonable  to  claim  that  the  capitalists  have 
taken  more  than  their  share  of  the  wealth  created 
by  the  improved  methods  of  production  which 
they  have  helped  to  introduce?  These  improved 
methods  have  been  the  outcome  of  general  prog- 
ress and  intelligence  and  not  the  creation  and 
work  of  capitalists  alone.  The  capitalists  them- 
selves are  the  product  of  the  times  in  which  they 


CAPITALISTIC  MONOPOLIES.  235 

live.  Circumstances  have  raised  them  to  power 
and  woukl  have  set  others  in  their  places  if  these 
particular  millionaires  had  never  lived.  There- 
fore the  J  ought  to  share  their  profits  with  their 
fellow-citizens,  who  in  many  cases  are  as  strong 
physically,  as  capable  mentally  and  as  good  mor- 
ally as  they.  Besides,  it  is  not  good  for  the  com- 
monwealth to  have  more  than  half  of  all  its  mate- 
rial wealth  in  the  hands  of  less  than  one  hundred 
and  fifty  thousand  families,  representing  less  than 
a  million  people  out  of  a  population  of  more  than 
seventy  million  souls.  This  is  injurious  to  the 
rich  and  unfair  to  the  middle  classes  and  the  poor. 
It  threatens  the  existence  of  the  Democracy  and 
reminds  us  of  conditions  in  France  before  the 
Revolution.  The  safety  of  the  Republic  depends 
upon  the  welfare,  material  and  moral,  of  the  mid- 
dle classes,  and  we  cannot  safely  allow  them  to 
be  destroyed. 

These  arguments  are  ethically  and  politically 
sound.  The  growth  of  enormous  fortunes  ought 
to  be  prevented,  provided  that  it  can  be  done  with- 
out seriously  impairing  the  productive  power  of 
the  nation.  If  capitalists  can  be  induced  to  un- 
dertake the  work  of  production  without  the  induce- 
ment and  hope  of  obtaining  for  themselves  as 
much  as  one  or  ten  or  one  hundred  millions  of 
dollars,  by  all  means  let  us  limit  the  reward,  but 
if  in  doing  this  we  diminish  the  production  by  an 


236  MONOPOLIES   PAST   AND   PRESENT. 

amount  equal  or  nearly  equal  to  the  present  profits 
of  capital,  such  Hmitation  cannot  be  beneficial  but 
only  injurious  to  the  public  at  large.  However,  it 
seems  probable  that  some  limitation  could  be  made 
which  would  secure  to  the  people  some  of  the 
profits  of  capital  without  discouraging  investment 
and  enterprise.  If  this  can  be  done,  it  ought  to 
be  done. 

In  considering  the  means  for  the  attainment  of 
this  end,  we  are  brought  face  to  face  with  the 
corruption  and  incapacity  of  legislators.  If  the 
growth  of  wealth  has  thus  sapped  the  moral  and 
intellectual  forces  of  the  nation  and  has  rendered 
the  people  unable  to  cope  with  the  difficulties  that 
have  arisen,  then  is  the  outlook  dark  indeed.  But 
the  patriotic  citizen  will  not  believe  that  the  heart 
of  the  nation  is  unsound  and  its  brain  diseased. 
He  will  hold  that  a  remedy  exists  and  can  be  found 
for  the  cure  of  superficial  ailments  and  temporary 
defects.  Yet  the  remedy  must  not  be  merely  tem- 
porary, to  do  away  with  the  evils  incident  to  the 
existence  of  trusts.  It  must  provide  for  the  per- 
manent health  of  the  industrial  organism.  Indus- 
trial progress  must  be  encouraged  and  the  benefits 
of  it  secured  as  far  as  possible  to  all  classes  of 
society. 

The  political  philosophy  of  the  industrial  revo- 
lution is  ready  with  its  answer  that  these  ends  can 
best  be  secured  by  the  method  of  liberty.     This 


CAPITALISTIC  MONOPOLIES.  237 

philosopher  is  an  optimist,  a  believer  in  human 
nature,  an  upholder  of  liberty  of  thought  and  ac- 
tion in  morals,  religion,  politics  and  industry.  In- 
dividual liberty  will,  in  time,  cure  all.  The  state 
has  little  or  no  industrial  function  to  perform.  It 
has  but  to  preserve  order,  to  keep  the  peace,  to 
prevent  physical  violence,  to  provide  good  roads, 
to  secure  sanitation,  to  prevent  epidemics,  to  carry 
the  mails,  to  represent  the  people  with  dignity  and 
honor.  Beyond  these  and  a  few  other  functions, 
the  state  must  not  go.  Into  the  sacred  domain  of 
industry  the  state  must  not  enter.  It  must  not 
interfere  with  buying  and  selling.  It  is  man's 
most  sacred  and  divine  right  to  buy  in  the  cheap- 
est market  and  to  sell  in  the  dearest.  When  com- 
plete industrial  liberty  prevails,  when  perfectly 
free  competition  obtains,  then  the  producer  will 
have  right  profits,  the  laborer  will  earn  fair  wages 
and  the  consumer  will  pay  just  prices.  By  virtue 
of  the  fundamental  law  of  supply  and  demand,  the 
economic  forces  perform  their  work  with  marvel- 
ous precision  and  all  the  parts  of  the  industrial 
world  revolve  in  their  proper  spheres  with  perfect 
harmony,  working  out  in  the  end  the  good  of  each 
and  the  good  of  all. 

Unfortunately  for  the  consistency  of  this  beauti- 
ful theory,  a  few  facts  of  industrial  life  perversely 
refuse  to  be  conformed  to  it.  The  parts  of  which 
the  economic  world  is  composed  are  chiefly  persons 


238  MONOPOLIES   PAST   AND    PRESENT. 

and  not  things.  Being  persons,  they  have  human 
interests  and  feelings  that  demand  recognition. 
The  interests  of  one  class  of  persons  are  not  always 
identical  with  those  of  every  other  class,  or  if  they 
are,  the  identity  is  hard  to  perceive.  As  a  result 
of  the  clash  of  interests  we  have  unjust  treatment 
of  men  by  men.  Not  all  oppression  is  due  to  the 
application  of  physical  force.  There  is  the  power 
of  money,  the  powder  of  position,  the  power  of  in- 
fluence, and  that  po^ver  has  often  been  used  for 
purposes  of  oppression.  Hence  the  state  has  been 
obliged,  contrary  to  the  advice  of  economic  theo- 
rists, to  make  laws  against  the  employment  of  very 
young  children,  against  the  employment  of  women 
in  mines,  against  unsanitary  conditions  in  fac- 
tories, securing  compensation  for  injuries  to  em- 
ployees, enforcing  contracts,  preventing  usury, 
protecting  seamen.  When  shall  this  legislation 
stop?  Where  can  we  draw  the  line?  Who  is  to 
say  thus  far  and  no  farther?  Is  it  not  true  that 
the  power  of  monopoly  is  great  and  growing 
greater?  Is  it  not  true  that  there  is  great  power 
in  the  possession  of  great  wealth  and  that  the  weak 
are  unable  to  contend  with  it?  Can  it  be  denied 
that  even  now  industrial  freedom  is  little  more 
than  a  name  ?  There  is  little  or  no  industrial  equal- 
ity and  freedom.  The  few  rule  and  the  many 
serve.  Even  before  the  law,  the  poor  man  is  not 
the  equal  of  the  rich.     Was  it  not  therefore  right 


CAPITALISTIC  MONOPOLIES.  239 

to  have  made  laws  protecting  the  weak  against  the 
strong  and  will  it  not  be  right  to  make  more  of 
such  laws  in  time  to  come? 

This  line  of  argument  has  much  weight  at  the 
present  time.  The  old  and  consistent  philosophy 
of  industrial  liberty  is  now  largely  discredited.  In 
its  place  we  have  the  views  of  men  who  are  in  gen- 
eral sympathy  with  the  doctrine  of  liberty  but 
who  see  that  it  sets  up  an  impracticable  ideal  and 
that  license  at  least  must  be  suppressed  by  law. 
Where  liberty  has  failed  law  must  intervene,  but 
it  must  be  clearly  sllo^^^l  that  liberty  has  failed 
and  that  law  can  provide  the  remedy.  We  must 
wait,  therefore,  until  we  are  clear  on  these  points. 
Evils  exist,  but  they  tend  to  work  out  their  own 
cure.  Only  a  little  assistance  is  required,  a  little 
stimulus  to  set  nature  at  work. 

This  may  be  supplied  in  several  ways.  The  in- 
terests of  capitalist,  wage-earner  and  consumer, 
are  in  the  long  run  the  same.  All  parties  should 
know  this.  If  they  knew  it,  they  would  all  agree. 
They  only  need  enlightenment.  "  Enlightened 
self-interest "  is  a  phrase  which  is  the  modern 
counterpart  of  the  Socratic  "  Knowledge  is  vir- 
tue." If  the  managers  of  a  trust  which  has  real 
monopoly  power  could  only  know  their  o^\ai  best 
interests,  they  would  not  unduly  lower  the  wages 
of  their  laborers  nor  would  they  raise  prices  be- 
yond the  point  of  fairness  to  the  consumer.     They 


240     MONOPOLIES   PAST   AND    PRESENT. 

would  keep  prices  low  and  wages  high  and  would 
be  content  with  small  dividends.  If  they  are  not 
wise  enough  to  do  this,  they  will  lose  in  the  end. 
Their  punishment  may  come  in  several  ways.  Per- 
haps some  other  great  capitalists  will  establish  a 
trust  in  competition  with  theirs  and  finally  destroy 
them  as  they  have  destroyed  their  competitors. 
Perhaps  the  trade  unions  will  become  strong  and 
will  compel  the  trust  to  pay  higher  wages.  Per- 
haps the  people  will  rise  in  their  wrath  and  sweep 
the  oppressor  from  the  face  of  the  earth.  These 
are  the  terrors  which  will  induce  the  trust  to  keep 
prices  below  the  level  of  greatest  net  returns, 
down  to  a  point  little,  if  any  higher  than  the  level 
of  free  competition. 

There  is  something  to  be  said  for  this  policy. 
The  power  of  potential  competition  is  not  insig- 
nificant. There  is  a  great  deal  of  capital  awaiting 
investment,  seeking  for  profitable  employment. 
When  the  profits  of  a  trust  are  high,  say  twenty 
or  thirty  per  cent,  the  eyes  of  those  who  command 
large  capital  are  quick  to  observe  a  chance  for 
profits.  They  consider  whether  they  can  safely 
enter  the  field  in  competition  with  the  trust  or  even 
threaten  so  to  do  and  thus  levy  a  kind  of  black- 
mail upon  the  enemy.  They  do  not  wish  to  com- 
pete for  the  sake  of  competing,  but  for  the  sake 
of  profits.  They  may  actually  compete  for  a  while, 
but  when  their  power  is  shown,  they  will  be  quite 


CAPITALISTIC  MONOPOLIES.  241 

willing  to  be  admitted  into  the  fold  of  the  trust, 
to  share  its  privileges  and  its  profits.  Now  a  trust 
does  not  want  to  admit  outsiders  and  if  it  wishes 
to  keep  them  out  it  must  not  offer  too  great  in- 
ducements in  the  shape  of  high  dividends.  It 
ought  not  to  insist  on  excessive  profits,  lest  sooner 
or  later  thej  should  be  taken  awaj. 

But  it  is  possible  to  exaggerate  the  effect  of 
potential  competition.  Human  nature  is  apt  to 
think  calamity  will  come  later  and  not  sooner. 
"  After  me  the  deluge."  Therefore  we  find  op- 
pression triumphant,  if  but  for  a  day.  The  op- 
pressed will  be  delivered,  the  oppressor  cast  down, 
but  how  soon?  In  the  words  of  Scripture,  the 
exploited  cry  out  "O  Lord,  how  long?"  Deliv- 
erance will  come,  Nature  will  work  out  its  own 
cure,  while  the  patient  still  lives  or  after  he  is 
dead. 

The  same  criticism  holds  good  with  regard  to 
the  opinion  that  the  growth  of  trade  unions  will 
solve  the  difficulty.  It  is  probably  true  that  the 
time  will  come  when  laborers  wall  be  as  well  or- 
ganized as  capitalists  and  will  be  in  a  position  to 
demand  and  obtain  their  rights.  The  trusts  will 
then  be  compelled  to  share  their  gains  with  the 
great  working  classes  who  constitute  the  bulk  of 
the  community.  It  will  then  be  necessary  to  have 
gome  general  industrial  court  to  decide  questions 

of  rates  and  prices,  in  order  that  one  industrial 
16 


242  MONOPOLIES   PAST   AND    PRESENT. 

group  may  not  receive  more  than  others.  This 
condition  will  be  very  near  the  ideal  of  socialism. 
It  is  possible  and  even  probable  that  some  such 
ideal  solution  will  work  itself  out  in  time,  and  per- 
haps at  no  very  distant  date,  but  are  we  to  fold 
our  hands  and  peacefully  wait  for  the  happy  con- 
summation or  are  we  to  hasten  the  day  by  every 
means  in  our  power,  that  we  may  have  some  of 
the  fruits  of  our  labors  here  and  now,  while  we 
are  still  alive  and  able  to  enjoy  them? 

The  extremists  who  say  that  trusts  must  be 
let  alone  are  well  matched  by  other  extremists 
who  say  they  must  be  suppressed  and  destroyed. 
These  are  the  authors  and  supporters  of  many 
anti-trust  laws  that  have  been  enacted  during  the 
past  ten  years,  especially  in  southern  and  western 
states.  In  the  minds  of  such  men,  not  only  are 
trusts  altogether  evil,  but  all  business  corporations 
bear  the  mark  of  the  beast.  They  have  no  soul, 
no  conscience,  no  tender  mercies.  Great  wealth 
in  the  hands  of  an  individual  owner  is  bad,  but 
in  control  of  an  incorporated  company,  it  is  ten- 
fold worse.  These  well-meaning  reformers,  re- 
alizing the  power  of  corporate  wealth,  think  that 
it  must  be  a  power  for  evil  and  not  for  good. 

The  modern  business  corporation  is  an  organi- 
zation well  devised  to  meet  the  needs  of  the  mod- 
ern business  world.  It  has  proved  its  value  by 
the  work  it  has  done  and  in  the  main  it  is  a  power 


CAPITALISTIC  MONOPOLIES.  243 

for  good.  Tt  is  almost  inconceivable  that  a  man 
of  average  intelligence  should  desire  to  see  cor- 
porations abolished  or  even  seriously  hampered  in 
their  operations.  They  are  not  perfect.  They 
may  need  to  be  improved,  but  not  annihilated. 
So  it  is  with  those  great  corporations  which  we 
call  trusts.  They  are  not  wholly  evil.  They  are 
rather  good  than  evil.  The  evils  are  incidental 
and  superficial.  The  good  is  essential  and  funda- 
mental. They  are  labor-saving  machines  of  high 
efficiency  and  great  public  utility.  It  is  better 
to  use  than  to  destroy.  It  is  either  impossible 
to  destroy  the  trusts  or  it  would  be  foolish  to 
destroy  them  if  it  were  possible. 

The  various  anti-trust  laws  have  failed  to  abol- 
ish trusts  and  have  failed  to  correct  their  abuses. 
They  have  been  chiefly  directed  against  the  form 
of  the  trust,  not  against  its  essential  nature.  The 
trust  is  capable  of  changing  its  form  many  times 
without  any  change  of  heart.  If  the  law  object 
to  the  trust  as  such,  it  will  become  a  simple  cor- 
poration. If  it  cannot  be  a  corporation,  it  will 
take  the  form  of  a  partnership.  If  a  partnership 
be  impossible,  it  wall  become  the  property  of  a 
single  owner.  If  it  be  persecuted  in  one  state,  it 
will  flee  to  another,  preferably  to  ISTew  Jersey  or 
Delaware.  The  anti-trust  agitation  is  misdirected 
energy.  It  is  war  against  progress.  Trusts  exist 
because  they  serve  the  public.     If  they  do  not 


244    MONOPOLIES   PAST   AND    PRESENT. 

serve  the  public  as  they  ought,  they  should  be 
compelled  to  serve  it  better. 

If  then,  the  trusts  are  not  to  be  let  alone  nor 
to  be  destroyed,  but  to  be  used  for  the  public 
benefit,  it  follows  that  they  must  be  brought  to 
a  greater  or  less  extent  under  government  con- 
trol. Public  opinion  may  do  much  in  the  way 
of  directing  legislation,  but  public  opinion  alone, 
without  the  power  of  law  to  sustain  and  enforce 
it,  would  accomplish  but  little.  In  time,  we  hope, 
society  will  be  regenerated,  and  an  offending  capi- 
talist will  be  readily  disciplined  by  means  of 
"  social  ostracism,"  but  meanwdiile,  the  power  of 
intelligent  and  virtuous  public  opinion  can  be  ap- 
plied through  representatives  and  legislators. 

If  we  are  to  have  legislation  dealing  with  trusts, 
ought  we  not  to  begin  with  mild  and  harmless 
measures,  by  way  of  experiment,  proceeding  to 
more  drastic  remedies  when  the  inadequacy  of  pal- 
liatives shall  have  been  clearly  shown?  Among 
the  more  conservative  measures  that  have  been 
proposed  is  the  reform  of  corporation  laws.  It 
is  almost  a  public  scandal  that  the  corporation 
laws  of  'New  Jersey  and  Delaware  are  so  favorable 
to  the  formation  of  trusts,  while  the  laws  of  some 
other  States  are  so  unfavorable  to  them.  Some- 
where there  must  be  error  and  injustice.  The  cor- 
poration laws  of  all  the  States  ought  to  be  essen- 
tially the  same.     The  United  States  is  a  nation, 


CAPITALISTIC  MONOPOLIES.  245 

and  not  a  confederacy  of  nations.  There  is  great 
need  of  a  national  corporation  law  resembling  in 
fiome  respects  the  national  banking  law.  Under 
such  a  law,  the  trusts  could  be  controlled  as  far 
as  might  be  necessary.  Without  such  a  law,  they 
can  never  be  placed  under  adequate  supervision 
and  control.  The  first  State  to  attempt  such  con- 
trol would  be  the  first  to  suffer  loss  by  driving 
away  capital  and  discouraging  enterprise. 

Then  there  ought  to  be  publicity  of  accounts. 
When  a  corporation  becomes  as  great  as  many  of 
the  trusts,  with  many  millions  of  capital,  doing 
business  in  all  parts  of  the  Union  and  possibly 
exercising  a  controlling  power  over  prices,  it  be- 
comes an  institution  of  national  importance  and 
clearly  "  affected  with  a  public  interest."  The 
people  are  concerned  and  ought  to  know  some- 
thing of  the  affairs  of  such  a  corporation.  While 
competition  prevails,  secrecy  may  be  imperatively 
demanded  but  when  it  is  wholly  or  in  part  re- 
strained, secrecy  is  no  longer  necessary.  Besides, 
it  would  not  be  wise  or  necessary  to  demand  more 
than  a  limited  amount  of  publicity.  The  systems 
of  accounting  ought  to  be  more  or  less  uniform. 
An  annual  statement  should  be  made,  showing  the 
financial  condition  of  the  corporation,  the  amount 
of  its  capital,  the  way  in  which  it  is  invested,  the 
di-^ndends  paid,  the  surplus  on  hand.  Much  of  this 
information  can  even  now  be  obtained  from  state- 


246     MONOrOLIES    PAST    AND    PRESENT. 

ments  issued  to  shareholders,  but  it  is  not  readily 
accessible  to  the  general  pul)lic.  Perhaps  the 
people  are  incapable  of  understanding  such  re- 
ports, but  if  they  are  to  be  the  judges  and  to  judge 
wisely  and  if  wise  legislation  is  to  be  enacted,  it 
is  necessary  for  them  to  know  the  facts. 

Also  it  is  probable  that  laws  ought  to  be 
passed  against  over-capitalization.  Stock-watering 
is  largely  practiced  in  order  to  conceal  dividends 
and  thus  to  deceive  the  public.  It  is  perhaps  bet- 
ter that  a  stock  should  sell  at  500  on  a  capitaliza- 
tion of  $100,000,000,  than  that  it  should  sell  at  100 
on  a  capitalization  of  $500,000,000,  provided 
that  the  value  of  the  plant  is  not  more  than 
$100,000,000.  A  corporation  should  be  capital- 
ized on  the  basis  of  its  material  wealth,  rather  than 
on  the  basis  of  its  earnings,  present  or  prospective. 
Otherwise  the  relation  of  the  earnings  to  the  orig- 
inal investment  is  obscured  and  it  is  not  possible 
to  distinguish  the  normal  profits  of  capital  from 
the  extraordinary  profits  of  franchise  or  monopoly. 

Another  much  needed  reform  concerns  discrimi- 
nation in  railway  rates.  It  has  been  said  that 
trusts  are  few  and  feeble  in  Germany  because  all 
shippers  are  treated  alike  by  the  government  rail- 
ways. However  this  may  be,  it  is  certain  that 
some  trusts  have  been  built  up  by  alliance  with 
the  railways  and  that  there  is  no  moral  or  economic 
justification  for  much  of  the  discrimination  that 


CAPITALISTIC  MONOPOLIES.  247 

prevails  and  has  prevailed  throughout  the  United 
States.  If  the  trust  is  to  prove  itself  the  latest 
and  most  useful  product  of  economic  evolution,  it 
must  defeat  its  rivals  upon  equal  ground,  in  a  fair 
field,  without  fear  or  favor.  A  solution  of  the 
railway  problem  will  contribute  not  a  little  to  the 
solution  of  the  problem  concerning  trusts  and 
monopolies. 

Again,  it  has  been  claimed  that  the  tariff  is  the 
mother  of  trusts  and  that  the  child  is  still  in  such 
vital  relations  to  its  parent  that  the  death  of  the 
parent  would  involve  the  death  of  the  child.  It 
is  therefore  proposed  to  abolish  the  tariff  and 
thereby  to  introduce  foreign  competition,  which 
would  break  down  the  monopoly  power  of  the 
trusts  if  not  the  trusts  themselves.  It  would  not 
be  necessary  to  do  away  with  the  tariff  in  all  its 
parts.  The  removal  of  the  tariff  would  merely 
be  a  remedy  held  in  reserve  for  any  particular 
case  of  monopoly  due  to  a  trust,  to  be  used  by  the 
federal  executive  whenever  it  became  evident  that 
such  monopoly  existed.  In  all  probability,  it 
would  seldom  be  necessary  to  use  this  remedy, 
since  the  trusts  would  be  careful  to  avoid  taking 
advantage  of  their  monopoly  power  for  fear  of 
having  it  taken  away  from  them,  with  their  more 
legitimate  profits  as  well. 

If  this  remedy  could  be  honestly  applied  it  18 
probable  that  it  would  be  effective  as  a  means  of 


24:8  MONOPOLIES    PAST   AND    PRESENT. 

preventing  monopoly  prices  in  those  lines  of  in- 
dustry which  still  "  need  "  protection  against  for- 
eign competitors  and  where  prices  are  maintained 
at  a  level  higher  than  would  be  possible  in  the  face 
of  such  competition.  In  such  cases,  the  removal 
of  the  tariff  would  cause  prices  to  fall  and  a  period 
of  international  competition  would  ensue.  The 
trusts  would  probably  continue  to  exist,  but  their 
monopoly  power  would  be  gone.  The  re-establish- 
ment of  monopoly  prices  would  be  possible  in  two 
ways.  On  the  one  hand,  the  American  producers 
might  be  able  to  lower  the  cost  of  production  to 
such  an  extent  that  foreign  producers  Avould  be 
obliged  to  abandon  the  market.  Then,  below  the 
level  of  foreign  competition,  there  might  be  a  lim- 
ited amomit  of  monopoly  control.  It  might  not 
be  beyond  the  power  of  a  powerful  American 
trust  to  worry  and  alarm  the  importer  of  foreign 
goods  to  such  an  extent  that  such  importation 
would  become  hazardous  and  unprofitable.  On 
the  other  hand,  the  formation  of  an  international 
trust  would  not  be  out  of  the  question,  and  such  a 
trust  could  not  be  destroyed  by  tariff  reform. 

In  the  case  of  trusts  which  even  now  sell  at 
prices  below  the  level  of  foreign  competition,  the 
removal  of  the  tariff  would  affect  them  very  little, 
if  at  all.  Among  trvists  of  this  class  are  probably 
The  Standard  Oil  Company,  the  great  iron  and 
steel   combinations.    The   United   States   Leather 


CAPITALISTIC  MONOPOLIES.  249 

Company,  The  Continental  and  American  Tobacco 

Companies,  The  Distilling  Company  of  America, 
The  American  Ice  Company,  The  American  Smelt- 
ing and  Refining  Company,  The  United  States 
Eubber  Company,  The  American  Bicycle  Com- 
pany, and  a  number  of  others,  including  a  large 
proportion  of  the  greater  trusts.  The  prices  of 
articles  produced  by  these  trusts  would  probably 
remain  as  high  or  nearly  as  high  as  now,  profits 
would  be  as  great,  wages  would  not  be  increased 
and  no  public  advantage  would  be  gained  beyond 
a  certain  security  against  future  misuse  of  monop- 
oly power. 

If  these  and  other  milder  measures  did  not  suc- 
ceed in  curing  the  evils  connected  with  trusts  and 
if  it  were  clear  that  the  evils  were  sufficiently 
great,  it  would  then  be  desirable  and  necessary 
to  adopt  more  severe  measures,  to  apply  more  radi- 
cal remedies.  It  is  proposed  to  regulate  the  trusts 
by  means  of  a  federal  commission  similar  to  the 
Interstate  Commerce  Commission,  but  with  far 
larger  powers  and  more  extensive  organization. 
Such  a  commission  might  be  a  regularly  organized 
department  under  the  federal  executive,  with  a 
member  of  the  Cabinet  at  its  head  and  all  neces- 
sary machinery  and  funds  at  its  command.  The 
trusts  would  be  recognized  by  law  and  legally 
placed  under  the  control  of  the  department  as  in 
the  case  of  the  national  banks,  only  the  control 


250     MONOPOLIES    PAST   AND    PRESENT. 

•would  be  more  complete  and  more  effective.  Offi- 
cials of  the  department  might  even  be  members 
of  the  board  of  management  of  the  trusts  and 
thus  exercise  control  from  within,  rather  than 
from  without. 

Two  main  lines  of  action  would  be  possible. 
The  department  might  regulate  prices  and  wages 
or  it  might  avoid  interference  with  the  conduct 
of  business  and  content  itself  with  taking  a  share 
of  the  gross  or  net  profits  in  the  form  of  special 
taxation.  Someone  has  suggested  that  the  trusts 
be  allowed  to  earn  four  per  cent,  interest  on  all 
capital  actually  invested  and  that  half  of  the  sur- 
plus profits  be  taken  by  the  government  for  the 
benefit  of  the  public  at  large.  The  pri\dlege  of 
establishing  a  national  monopoly  w^ould  be  an  ex- 
ceedingly valuable  franchise  and  capitalists  would 
be  willing  to  pay  largely  and  think  it  no  hardship 
so  to  do.  The  great  income  of  the  federal  gov- 
ernment might  be  used  to  relieve  the  common 
people  from  taxation  or  to  establish  a  system  of 
w^orking-men's  insurance  or  to  benefit  the  people 
in  some  other  way. 

Another  remedy  that  has  been  suggested  is  con- 
nected With  reform  in  taxation,  especially  in  re- 
gard to  income  and  inheritance  taxes.  It  is  said 
that  business  men  ought  to  be  allowed  to  carry  on 
business  in  their  own  w^ay  and  by  whatever  meth- 
ods they  please,  but  that  after  they  have  accumu- 


CAPITALISTIC  MONOPOLIES.  251 

lated  their  profits,  the  state  ought  to  step  in  and 
claim  the  share  of  the  people.  It  is  undesirable 
that  great  fortunes  should  be  perpetuated.  No 
man  is  the  creator  of  himself  or  his  fortune.  Both 
are  the  products  of  environment.  There  is  an 
unearned  increment  and  that  increment  belongs 
to  the  people.  Therefore  it  is  right  that  there 
should  be  a  progressive  income  tax  and  hea^v^ 
succession  duties.  A  just  income  tax  would  ex- 
empt small  incomes  and  tax  large  ones  at  a  pro- 
gressive rate.  An  income  of  $10,000  a  year 
might  pay  a  tax  of  ten  per  cent. ;  a  tax  of  twenty 
per  cent,  might  be  levied  on  an  income  of  $100,000, 
while  fifty  per  cent  AAOuld  not  be  an  excessive  tax 
on  an  income  of  $10,000,000.  Then,  at  the  death 
of  the  millionaire,  if  any  such  were  left  after  the 
surgical  operations  of  the  income  tax,  a  proper 
share  of  his  fortune  would  go  to  the  state.  An 
estate  of  $1,000,000  might  pay  an  inheritance  tax 
of  twenty  or  thirty  per  cent.,  while  it  would  be 
right  and  projier  for  the  state  to  appropriate  as 
much  as  one-half  of  an  estate  of  $100,000,000,  es- 
pecially if  willed  to  collateral  heirs.  In  this  way 
great  fortunes  would  be  distributed  among  the 
people  after  two  or  three  generations  and  the 
fruits  of  industry  be  restored  to  the  producers  of 
it.  This  would  be  confiscation  but  why  is  confis- 
cation always  unjust? 

Public  ownership  is  put  forward  as  perhaps  the 


252    MONOPOLIES   PAST   AND    PRESENT. 

most  radical  of  all  the  remedies  for  the  evils  of 
trust.  It  would  be  introduced  little  by  little. 
First,  the  railways  would  be  taken,  together  with 
municipal  monopolies.  Then,  after  experience 
had  been  gained  and  success  thus  far  assured,  steps 
could  be  taken  leading  to  the  complete  ownership 
and  management  of  trusts  and  all  other  industrial 
enterprises  by  the  state. 

In  order  to  render  possible  any  of  these  more 
radical  measures,  or  to  render  them  unnecessary, 
one  or  more  amendments  to  the  federal  constitu- 
tion will  no  doubt  be  necessary.  It  is  probably 
impossible  under  the  present  constitution  for 
either  the  federal  government  or  the  state  govern- 
ment to  control  the  trusts.  If  they  are  to  be  con- 
trolled and  not  destroyed,  it  will  be  necessary  that 
this  be  done  by  means  of  a  central  authority  such 
as  only  the  federal  government  can  exercise.  The 
framers  of  the  constitution  could  not  foresee  the 
economic  evolution  of  a  hundred  years.  We  re- 
spect the  memory  of  Hamilton,  Madison  and  the 
rest,  but  we  cannot  be  forever  bound  by  the  prin- 
ciples and  rules  which  they  laid  down.  The  times 
have  changed. 

While  considering  solutions  and  remedies,  it 
must  not  be  forgotten  that  the  problem  to  be 
solved  is  to  a  large  extent  a  new  problem,  and  one 
upon  which  the  study  of  history  can  throw  at  best 
a  dim  and  uncertain  light.     Conditions  are  new. 


CAPITALISTIC  MONOPOLIES.  253 

Experiments  must  be  made,  but  they  must  be  made 
"with  caution.  There  is  no  need  for  extreme  haste. 
We  must  move  but  we  must  move  slowly.  It  is 
necessary  to  be  sane.  It  is  necessary  to  be  cool- 
headed.  It  may  be  necessary  to  denounce  but 
denunciation  is  not  trial,  is  not  conviction.  There 
is  great  need  of  general  and  special  education,  gen- 
eral education  to  give  broad  views  and  special  edu- 
cation in  economics  and  kindred  studies  to  give  an 
appreciation  of  the  nature  and  difficulties  of  the 
problems  to  be  solved.  It  is  possible  that  the 
problems  will  work  out  their  own  solution.  It  is 
probable  that  the  best  solution  will  be  the  result 
of  the  intelligent  cooperation  of  man  with  his 
environment,  changing  the  environment  and 
changing  the  man.  Trusts  are  the  product  of 
intelligence  and  they  must  be  subject  to  the  power 
of  their  creator. 


INDEX. 


African  or  Guinea  Company, 
70,  71. 

Amalgamated  Copper  Com- 
pany, 207. 

Amendments  to  tlie  Constitu- 
tion, 252. 

American  Bicycle  Company, 
207,  249. 

American  Steel  and  Wire  Com- 
pany, 207. 

American  Sugar  Refining  Com- 
pany, 207. 

Anti-trust  laws,  243. 

Assizes  of  Bread,  Ale,  Wine, 
Cloth.  33. 

Bacon,   Francis,  63. 

Baltimore  and  Ohio  Railway, 
145. 

Bell  Telephone  Company,  102. 

Berne   Convention,   111. 

Black  Death,   33. 

Brazil  Company,  85. 

Bridges,   4. 

British  East  India  Company, 
71-82. 

Cabot,  John  and  Sebastian,  68. 

Canals,  4. 

Canonists,  34,  37. 

Carnegie  Company,   207. 

Cities,  growth  of,  119. 

Cleomenes  of  Alexandria,  28. 

Coke,  Sir  Edward,  93. 

Colepepper's  speech,   94. 

Collegia  and  Sodalicia,  42. 

Continental  Tobacco  Company, 
207,  249. 

Company  of  One  Hundred  As- 
sociates, 85. 

Complete  Monopoly,  5,  10,  11. 

Competition.  5,  11,  36,  52,  61, 
63,  70.  75,  76.  78,  83,  84, 
108,  123,  124,  149,  154.  211- 
213,   215,   220,  223,  232. 

Corners,   16,   25,  26. 

Corporations,  194,  210,  211, 
212. 

Corruption,  77,  135.  236. 

Cost  of  Production,  10,  147, 
148,  214-220,  222. 

Darlen  Company,  80,  85. 


Definition  of  Monopoly,   1-7. 
De  Beers  t'ompany,   14. 
Discrimination.      102-171,     185, 

189,  246.  247. 
Dispensation.  tJ3. 
Distilling  Company  of  America, 

207,  249. 
Disturbance  to  industry,  231. 
Dividends.    150,    151,    152,    161, 

233,    234. 
Dutch    East    India    Company, 

73,  85. 
Dutch    West    India    Company, 

85. 
Eastland  Company,  62. 
Egyptian   monopolies,   24. 
Elizabeth,    Queen.   62,    90-92. 
Enlightened    self-interest,    124, 

168,  179,  239. 
Fair  prices,  wages,  profits,  34, 

35.    127-130,    185,    186,    190, 

192,   235,  237. 
Farming  the  revenue,  88. 
Federal    Steel    Company,    207, 

249. 
Ferries,  4. 
Fixed  capital,  156. 
Forestalling    and     engrossing, 

29,  30,  31.  36. 
Franchises,    88,    129,    130,    131, 

135. 
French    East    India    Company, 

85. 
Gas  works,  4,   122,   123,  125. 
Government    aid    to    railways, 

147,  148,   176,   177,   184. 
Government  monopolies,  4,  17, 

18. 
Granger    movement,    184-187. 
Greece,   monopolies  in,  27,  28, 

29.  42. 
Hanseatic   League,   56-59. 
Hudson's  Bay  Company,  3,  82- 

85. 
Industrial   liberty.  64,   70,   131, 

174-lSO,   236-241. 
Industrial    revolution,   64,    119. 
Industrial    securities.    219,  231. 
Interlopers,   61,  63,  68,   70,  75, 

76,  77. 


255 


256 


INDEX. 


International    Copyright,    109- 

112. 
International  Paper  Company. 

207 
International   Patent,  98 
Interstate  Commerce  Act,  188. 
Interstate  Commerce  Conimis- 
^       sk'n!  151,   188-190,   249. 
Instability    of    Monopoly,     lb, 

Irrigation  works,  4^ 
Jacob  and  Esau,  2q.  20. 
Joint-stock  companies,   62,   b9, 

210-212. 
Joseph  in   Egypt.   26. 
Land,  property  in,   14,  1^- 
I^etters  patent,   88. 
Levant    or    Turkey    Company, 

62.  .         .. 

Livery  Companies,  44. 

Limited  Liability.  210. _ 

Louisiana   Company,  8o. 

Lysias  against  the  corn  fact- 
ors, 27,  28. 

Merchant    Adventurers,    59-b2, 

Merchants   of   the    Staple,    5o, 

Monopoly  control,  5-12,  26,  27, 
28  30,  125,  126,  12  (,  lu3- 
IsS,   158,   162-171,   173,  178, 

Of)  4_02ft 

Monopoly  price,  7-15,  28-32  70, 
71,  90,  111.  113.  124,  12o, 
153,  155,  173,  201,  202,  224- 
228. 

Monopoly  profits,  77.  80,  111. 
113,   150,  151,  233,  234. 

Municipal   contracts,   127,   xsu. 

Municipal  improvements,  12U. 
122. 

Municipal    ownership,    131-142. 

Muscovy   or   Russia  Company, 

Natural    monopolies,    121,    123, 

179. 
Navigation  Act,  73. 
North  West  Fur  Company,  83. 
Partial   monopoly,   5. 
Paul  at  Ephesus,  42. 
Phoenicia,   24,   25. 
Piers  Plowman.  33. 
Portuguese  monopoly,  72,   /rf. 
Potential     Competition,      24U, 

241. 
Promoters,  231. 
Property,  12. 

Public   aid    to    railways,    147, 
148. 


Publicity  of  accounts,  24o. 

Public  character  of  rallwa^s, 
176-178.  .  , 

Public  control  of  prices  and 
rates.  32-36.  126-131,  lib, 
185-187,    189,   191,   195,   250. 

Public  and  private  ownership, 

^"104    131142,   180-183,   251. 

Railway  combination  and  con- 
solidation,     158-160,       189, 

192-195.  -.K-i  i-a 

Railway     rates      147,     151-l-^6, 

162-171,   174,  179,   I80,  188, 

191,  192.  ^        . 

Railways  In  relation  to  trusts, 

171,   172,  246. 
Railways  as  highways,   177. 
Reading  coal  combine    1|3. 
Regulated  companies.  bl-b4,  hi. 
Regulations  of  gilds.  4b-50.  o3, 

.54.  ,  .      ^. 

Savings    due    to    combination, 

214-220. 
Scarcity  price,   13,  14. 
Stationers'    Company,   104. 
Standard    Oil    Company,,   1-2, 
20t»    204,  207.  2I0.  22o,  248. 
Statute    of    Queen    Anne,    lOo, 

1*^6.  ,.        „„ 

Statute  of  Monopolies.  93. 
Statute  of  Laborers.  33. 
Stockton  and  Darlington  Rail- 
way. 145. 
Street  Railways.  4.  123,  12o. 
South  Sea  Company,  80,  80. 
Tariff  and  trusts.  208.  247-249. 
Taxation.   250,  251. 
Tch'phone  lines,   123. 
Ttinporary   monopoly,  lb,  114, 

2<tl,  204". 
Thomas    Aquinas,    34. 
Trade  unions,   64. 
Trusts,   4,    16,    24,    43,   64,   204- 

251 
United    States    Leather    Com- 
pany, 207,   248. 
United    States    Rubber    Com- 
pany,   248. 
United    States    Steel    Corpora- 
tion, 208. 
Virginia   Company,  85. 
Wages.  229.  230. 
Waste    of     Competition,     izs, 

214-220. 
Watering   of  stocks,    148,   161, 

232    246. 
Waterworks,  121,  125. 
Western  Union  Telegraph  Com- 
pany, 233. 


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